AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CELTIC INVESTMENT, INC.
a Delaware Corporation
AND
SALT LAKE MORTGAGE CORP.
a Utah Corporation
AND
THE SHAREHOLDERS OF SALT LAKE MORTGAGE CORP.
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.1. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3. Conversion of SLM Securities . . . . . . . . . . . . . . . . . 4
2.4. Effect of Conversion . . . . . . . . . . . . . . . . . . . . . 4
2.5. Conversion of Capital Stock of Celtic Merger Sub . . . . . . . 4
2.6. Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . 5
2.7. Reorganization . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8. Escrow of Shares . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
THE SURVIVING CORPORATION AND AFFIRMATIVE
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1. Surviving Corporation. . . . . . . . . . . . . . . . . . . . . 5
3.2. Articles of Incorporation. . . . . . . . . . . . . . . . . . . 6
3.3. Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4. Directors and Officers of SLM. . . . . . . . . . . . . . . . . 6
3.5. Effect of Merger . . . . . . . . . . . . . . . . . . . . . . . 6
3.6. Directors and Officers of Celtic . . . . . . . . . . . . . . . 6
3.7. Registration Rights. . . . . . . . . . . . . . . . . . . . . . 6
3.8. Amendments to Articles of Incorporation and Bylaws
of Celtic and SLM . . . . . . . . . . . . . . . . . . . . . 7
3.9. Access to Information . . . . . . . . . . . . . . . . . . . . . 7
3.10. Preemptive Rights. . . . . . . . . . . . . . . . . . . . . . . 7
3.11. Rules 144 and 144A. . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Documents at Closing . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
SHAREHOLDERS AND SLM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.1. Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2. Restricted Shares to be Issued . . . . . . . . . . . . . . . . 9
5.3. Organization . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.4. Capitalization . . . . . . . . . . . . . . . . . . . . . . . .10
5.5. Reorganization and Securities Related Expenses . . . . . . . .10
5.6. Authority Relative to this Agreement . . . . . . . . . . . . .11
5.7. Approvals and Consents; Non-Contravention. . . . . . . . . . .12
5.8. Articles of Incorporation and Bylaws . . . . . . . . . . . . .13
5.9. Financial Statements . . . . . . . . . . . . . . . . . . . . .13
5.10. No Undisclosed Material Liabilities . . . . . . . . . . . . .14
5.11. Absence of Certain Changes or Events. . . . . . . . . . . . .14
5.12. Litigation and Proceedings. . . . . . . . . . . . . . . . . .15
5.13. Compliance with Laws, Rules and Regulations . . . . . . . . .15
5.14. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . .16
5.15. Material Contract Defaults. . . . . . . . . . . . . . . . . .16
5.16. Taxes and Tax Returns . . . . . . . . . . . . . . . . . . . .16
5.17. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . .17
5.18. Title and Related Matters . . . . . . . . . . . . . . . . . .17
5.19. Intellectual Property . . . . . . . . . . . . . . . . . . . .17
5.20. Accounts Receivable . . . . . . . . . . . . . . . . . . . . .17
5.21. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .18
5.22. Environmental Matters . . . . . . . . . . . . . . . . . . . .18
5.23. Employees . . . . . . . . . . . . . . . . . . . . . . . . . .19
5.24. Relationships with Associates and Affiliates. . . . . . . . .19
5.25. Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
5.26. SLM Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . .19
5.27. Information. . . . . . . . . . . . . . . . . . . . . . . . . . . .21
5.28. Limitation on Liability. . . . . . . . . . . . . . . . . . . . . .21
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
CELTIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
6.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . .22
6.2. Capitalization . . . . . . . . . . . . . . . . . . . . . . . .22
6.3. Authority Relative to this Agreement . . . . . . . . . . . . .23
6.4. Reorganization and Security Related
Representations . . . . . . . . . . . . . . . . . . . . . .23
6.5. Approvals and Consents; Non-Contravention. . . . . . . . . . .24
6.6. Certificate of Incorporation and Bylaws. . . . . . . . . . . .24
6.7. Financial Statements . . . . . . . . . . . . . . . . . . . . .25
6.8. No Undisclosed Material Liabilities. . . . . . . . . . . . . .26
6.9. Absence of Certain Changes of Events . . . . . . . . . . . . .26
6.10. Litigation and Proceedings. . . . . . . . . . . . . . . . . .27
6.11. Compliance with Laws, Rules and Regulations . . . . . . . . .27
6.12. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . .28
6.13. Material Contract Defaults. . . . . . . . . . . . . . . . . .28
6.14. Taxes and Tax Returns . . . . . . . . . . . . . . . . . . . .28
6.15. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .29
6.16. Title and Related Matters . . . . . . . . . . . . . . . . . .29
6.17. Intellectual Properties . . . . . . . . . . . . . . . . . . .29
6.18. Accounts Receivable . . . . . . . . . . . . . . . . . . . . .30
6.19. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .30
6.20. Environmental Matters . . . . . . . . . . . . . . . . . . . .30
6.21. Employees . . . . . . . . . . . . . . . . . . . . . . . . . .31
6.22. Relationships with Affiliates and Associates. . . . . . . . .31
6.23. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . .32
6.24. Celtic Schedules. . . . . . . . . . . . . . . . . . . . . . .32
6.25. Information . . . . . . . . . . . . . . . . . . . . . . . . .33
6.26. Additional Information Available. . . . . . . . . . . . . . .33
6.27. Limitation on Liability. . . . . . . . . . . . . . . . . . . . . .33
ARTICLE VII
CONDUCT PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . .34
7.1. Conduct of Business. . . . . . . . . . . . . . . . . . . . . .34
7.2. Additional Covenants by SLM and SLM Shareholders
and Celtic. . . . . . . . . . . . . . . . . . . . . . . . .34
7.3. Access . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
7.4. Compliance with Blue Sky Law . . . . . . . . . . . . . . . . .36
7.5. Disclosure Supplements, Etc.. . . . . . . . . . . . . . . . . . . .36
7.6. Reasonable Efforts. . . . . . . . . . . . . . . . . . . . . . . . .36
7.7. Public Announcements. . . . . . . . . . . . . . . . . . . . . . . .36
ARTICLE VIII
CONDITIONS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . .37
8.1. Representations. . . . . . . . . . . . . . . . . . . . . . . .37
8.2. Compliance . . . . . . . . . . . . . . . . . . . . . . . . . .37
8.3. No Material Adverse Change . . . . . . . . . . . . . . . . . .37
8.4. Certificate of Celtic. . . . . . . . . . . . . . . . . . . . .37
8.5. Absence of Litigation. . . . . . . . . . . . . . . . . . . . .37
8.6. Good Standing. . . . . . . . . . . . . . . . . . . . . . . . .37
8.7. Employment Agreements. . . . . . . . . . . . . . . . . . . . .37
8.8. Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
8.9. Advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
8.10. Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . .38
8.11. Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . .38
ARTICLE IX
CONDITIONS OF CELTIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
9.1. Representations. . . . . . . . . . . . . . . . . . . . . . . .38
9.2. Compliance . . . . . . . . . . . . . . . . . . . . . . . . . .38
9.3. No Material Adverse Change . . . . . . . . . . . . . . . . . .38
9.4. Certificates of Shareholders and SLM . . . . . . . . . . . . .38
9.5. Absence of Litigation. . . . . . . . . . . . . . . . . . . . .38
9.6. Good Standing. . . . . . . . . . . . . . . . . . . . . . . . .39
9.7. Investment Letters . . . . . . . . . . . . . . . . . . . . . .39
9.8. Form 8-K Financial Statements. . . . . . . . . . . . . . . . .39
9.9. Employment Agreements . . . . . . . . . . . . . . . . . . . . . . .39
9.10. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
9.11. Advantage. . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
9.12. Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . .39
9.13. Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . .39
ARTICLE X
INDEMNIFICATION, SURVIVAL, TERMINATION AND
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
10.1. Nature and Survival of Representations. . . . . . . . . . . .39
10.2. Indemnification and Payment of Damages by
Shareholders. . . . . . . . . . . . . . . . . . . . . . . .39
10.3. Indemnification and Payment of Damages by
Celtic. . . . . . . . . . . . . . . . . . . . . . . . . . .40
10.4. Limitations on Amount--Shareholder. . . . . . . . . . . . . .40
10.5. Limitations on Amount--Celtic . . . . . . . . . . . . . . . .41
10.6. Procedure for Indemnification--Third Party Claims . . . . . .41
10.7. Procedure for Indemnification--Other Claims . . . . . . . . .42
10.8. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . .43
10.9. Exclusive Remedies. . . . . . . . . . . . . . . . . . . . . .44
10.10. Termination. . . . . . . . . . . . . . . . . . . . . . . . .44
10.11. Effect of Termination. . . . . . . . . . . . . . . . . . . .45
ARTICLE XI
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
11.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .45
11.2. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . .46
11.3. Effect; Assignment. . . . . . . . . . . . . . . . . . . . . .46
11.4. Amendments; Waivers . . . . . . . . . . . . . . . . . . . . .46
11.5. Further Assurances. . . . . . . . . . . . . . . . . . . . . .46
11.6. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . .46
11.7. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . .47
11.8. Severability. . . . . . . . . . . . . . . . . . . . . . . . .47
11.9. Governing Law . . . . . . . . . . . . . . . . . . . . . . . .47
11.10. Legal Fees and Expenses. . . . . . . . . . . . . . . . . . .47
11.11. Schedules, Exhibits and Amendments . . . . . . . . . . . . .47
Attachments
Exhibit AA@--Articles of Merger
Exhibit AB@--List of SLM Shareholders
Exhibit AC@--Escrow Agreement
Exhibit AD@--Investment Letter
Exhibit AE@--Employment Agreement
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (AAgreement@) is entered into
this 15th day of January, 1997, by and between Celtic Investment, Inc., a
Delaware corporation ("Celtic"); Celtic Merger Sub, Inc., a Utah corporation
and the wholly-owned subsidiary of Celtic (ACeltic Merger Sub@); Salt Lake
Mortgage Corp., a Utah corporation, ("SLM"); and ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. and
▇▇▇▇▇ ▇. ▇▇▇▇▇, the Shareholders of SLM ("Shareholders").
RECITALS
The Boards of Directors of Celtic and SLM have each determined that
it is advisable and in the best interests of their respective shareholders to
enter into this Agreement and to engage in the transactions contemplated
hereby pursuant to which Celtic Merger Sub will merge into SLM; and the
outstanding shares of the common stock of SLM will be converted into
shares of common stock of Celtic; and
The Shareholders and SLM have made certain representations to
Celtic concerning the status, operations and condition of SLM, which
representations are contained in this Agreement; and
Celtic has made certain representations to SLM and the Shareholders
concerning the status, operations and condition of Celtic, which
representations are contained in this Agreement;
The Boards of Directors of Celtic, Celtic Merger Sub and SLM have
approved the Merger agreed to herein;
AGREEMENT
In consideration of the mutual agreements, representations, warranties
and covenants contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties agree as follows:
Article I
Definitions
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
AAssociate@--when used to indicate a relationship with any Person,
means (i) a corporation or organization (other than such Person or a majority-
owned subsidiary of such Person) of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of ten (10) percent
or more of any class of equity securities, (ii) any trust or other estate in
which such Person has a substantial beneficial interest or as to which such
Person serves as trustee or in a similar capacity, and (iii) any Affiliate of
such Person.
AAffiliate@--of a Person is a Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person.
"Contract"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Governmental Authorization"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district, or
other political subdivision of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal); or
(d) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory,
or taxing authority or power of any nature.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge"--an individual will be deemed to have "Knowledge" of
a particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course
of conducting a reasonably comprehensive investigation concerning
the existence of such fact or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter under the foregoing clauses
(a) or (b).
"Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Order"--any award, decision, injunction, judgment, order, ruling or
verdict entered, issued, made, or rendered by any court, administrative
agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person.
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Proceeding"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or
otherwise involving, any Governmental Body or arbitrator; provided, however,
that any representation or warranty concerning "Proceedings", shall, with
respect to audits and investigations, be deemed made only to the Knowledge
of the party making such representation or warranty and such party shall not
be deemed to be required to make any inquiry of any Governmental Body
concerning the pendency of any investigation or audit with respect to itself or
the subject matter of the representation
AProspects@ -- shall be limited to the general business expansion
plan of a Person with respect only to potential new markets, potential new
operations and potential new lines of business which such Person is currently
considering. Prospects does not refer to any financial projections. Prospects
are by their very nature speculative and a Person shall not be deemed to
represent, warrant or guarantee that its Prospects will be ever be realized or
that its Prospects will not change from time to time.
"Securities Act"--the Securities Act of 1933 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
ASecurities Exchange Act A-- the Securities Exchange Act of 1934
or any successor law, and regulations and rules issued pursuant to that Act
or any successor law.
"Tax Return"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment,
collection, or payment of any tax or in connection with the administration,
implementation, or enforcement of or compliance with any Legal Requirement
relating to any tax.
"Threatened"--a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing) that would lead a prudent Person to conclude that such a claim,
Proceeding, dispute, or other matter is likely to be asserted, commenced,
taken, or otherwise pursued in the future.
ATransaction@ -- the Merger provided for and agreed to herein and
all employment matters, escrows and other matters and agreements provided
for herein.
Article II
The Merger
2.1 The Merger. Subject to the terms and conditions of this
Agreement and the Revised Business Corporation Act of the State of Utah
(AUtah Statute@), at the Effective Time (as defined in Section 2.2 of this
Agreement), Celtic Merger Sub will be merged with and into SLM (the
"Merger") whereupon the separate existence of Celtic Merger Sub shall cease
and SLM shall be the surviving corporation ("Surviving Corporation").
2.2. Effective Time. The Merger shall become effective when
properly executed Articles of Merger in the form of those attached hereto as
Exhibit A, are duly filed with the Division of Corporations, Department of
Commerce of the State of Utah pursuant to the Utah Statute. The time at
which such Articles of Merger are filed shall be referred to in this Agreement
as the "Effective Time" and the date on which the Effective Time occurs is
referred to in this Agreement as the "Effective Date".
2.3. Conversion of SLM Securities. At the Effective Time, all shares
of common stock of SLM outstanding ("SLM Common Stock") shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted ( AConverted@, AConversion@ or AExchange@) into shares of
$.001 par value common stock of Celtic ("Celtic Common Stock"). Each
share of SLM Common Stock outstanding immediately prior to the Effective
Time shall be Converted into approximately 11.1111 shares of Celtic Common
Stock. At the Effective Date, there will be 99,000 shares of SLM Common
Stock issued and outstanding all of which will be Converted into 1,100,000
shares of Celtic Common Stock. Attached hereto as Exhibit AB@, and by this
reference made a part hereof, is a list of the Shareholders of SLM which sets
forth the number of shares of SLM Common Stock owned by each and the
number of shares of Celtic Common Stock to be issued to each Shareholder
in the Conversion. At the Effective Time, there will be 1,000 shares of SLM
preferred stock issued and outstanding (ASLM Preferred Stock@), none of
which will be Converted into Celtic Common Stock but instead all of which
shall remain outstanding and unaffected by the Merger. Exhibit AB@ also
describes such SLM Preferred Stock and the beneficial owner thereof.
2.4. Effect of Conversion. Each share certificate which immediately
prior to the Effective Time represented SLM Common Stock, shall be deemed
for all purposes at and after the Effective Time to evidence ownership of, and
to represent the number of shares of Celtic Common Stock into which the
shares of SLM Common Stock represented by such certificate immediately
prior to the Effective Time, have been Converted pursuant to Section 2.3
hereof. Each Shareholder of SLM at the Effective Time shall, until such
owner's certificate for SLM Common Stock has been surrendered for transfer
or exchange, be entitled to exercise any voting and other rights with respect
thereto and be entitled to receive any dividends or other distributions,
equivalent to the number of shares of Celtic Common Stock into which the
shares of SLM Common Stock represented by such certificate have been
Converted.
2.5. Conversion of Capital Stock of Celtic Merger Sub. At and as
of the Effective Time, each share of the common stock of Celtic Merger Sub
shall be converted into one share of common stock of the Surviving
Corporation.
2.6. Exchange of Shares. The exchange of share certificates shall
be effected by Celtic. Celtic shall deliver to the Shareholders certificates
for the shares of Celtic Common Stock to be Exchanged for stock certificates
representing all shares of SLM Common Stock pursuant to the terms of this
Agreement. Each holder of an outstanding certificate or certificates
representing SLM Common Stock shall be entitled, upon surrender of such
certificate(s) to Celtic, duly endorsed in blank or accompanied by stock
powers duly endorsed in blank, to receive a certificate representing the
number of shares of Celtic Common Stock into which SLM Common Stock
shall have been Converted pursuant to the Merger. All Celtic stock certificates
issued to the Shareholders at the Effective Time shall contain a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") OR ANY
STATE SECURITIES ACT AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS (A) COVERED BY AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
ACTS; (B) CELTIC HAS BEEN FURNISHED WITH AN OPINION OF
COUNSEL, BOTH OF WHICH OPINION AND COUNSEL SHALL BE
REASONABLY ACCEPTABLE TO CELTIC, TO THE EFFECT THAT NO
REGISTRATION IS LEGALLY REQUIRED FOR SUCH TRANSFER; OR
(C) THESE SECURITIES ARE SOLD IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER THE ACT.
No opinion of counsel shall be required with respect to the transfer
of shares from the Shareholders to the Escrow Agent or from the Escrow
Agent to the Shareholders.
2.7. Reorganization. It is the intent of the parties that the Merger
will qualify as a tax-free reorganization under Section 368(a)(1)(A) of the
IRC and will report the Merger accordingly for federal, state and local income
tax purposes. The parties acknowledge that no Person has obtained a revenue
ruling from the IRS or a legal opinion as to the tax consequences and effect
of the Merger.
2.8. Escrow of Shares. The parties agree that the value of SLM
is based, in part, upon its projected future earnings. Inasmuch as the amount
of SLM's future earnings are unknown, the Shareholders agree to deposit a
portion of Celtic Common Stock issued at the Effective Time into an escrow
("Escrow"). At the Effective Time, 500,000 of the shares of Celtic Common
Stock (AEscrow Shares@) issued to the Shareholders shall be deposited into
Escrow and retained therein and released therefrom pursuant to the Escrow
Agreement (AEscrow Agreement@) attached hereto as Exhibit AC@ and by
this reference made a part hereof. The Escrow Shares shall be released from
the Escrow in accordance with the terms of the Escrow Agreement.
Article III
The Surviving Corporation and Affirmative Covenants
3.1. Surviving Corporation. In the Merger, Celtic Merger Sub shall
merge into SLM and SLM shall be the Surviving Corporation.
3.2. Articles of Incorporation. The Articles of Incorporation of SLM
in effect at the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation until amended in accordance with applicable law.
3.3. Bylaws. The Bylaws of SLM in effect at the Effective Time shall
be the Bylaws of the Surviving Corporation until amended.
3.4. Directors and Officers of SLM. From and after the Effective
Time, the directors and officers of SLM, the Surviving Corporation shall be as
follows:
Directors Officers
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. -
Chairman, CEO
President
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ -
Vice President Sales
and
Marketing/Secretary
/Treasurer
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Such officers and directors shall constitute the directors and
officers of the SLM to serve in accordance with the Bylaws of SLM until their
respective successors have been duly elected or appointed and qualified.
3.5. Effect of Merger. The Merger will have the effects specified
in Section 16-10a-1106 of the Utah Statute.
3.6. Directors and Officers of Celtic. Celtic shall, prior to the
Effective Time, take all action reasonably necessary to insure that the
Directors and Officers of Celtic shall, immediately after the Effective Time, be
as follows:
Directors Officers
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ -
President/CEO
▇▇▇▇▇▇ Talks ▇▇▇▇▇ ▇▇▇▇▇▇▇▇-
Chief Financial
Officer
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. -
Senior Vice
President
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇
Such officers and directors shall constitute the directors and
officers of Celtic to serve in accordance with the Bylaws of Celtic until their
respective successors have been duly elected or appointed and qualified. At the
next two Annual Meetings of Celtic Shareholders, the Celtic Board of Directors
shall nominate ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇. and ▇▇▇▇▇▇ ▇▇▇▇▇, as two of the nominees
of the Celtic Board of Director=s slate of directors and recommend to the
Celtic shareholders such persons election as directors of Celtic.
3.7. Registration Rights. If, after the Effective Time, Celtic
grants any registration rights to any Person other than the Shareholders in
connection with an acquisition, merger or business combination of any type
or kind in which any security of Celtic is issued to such Person, then in such
event, and at such time, the Shareholders shall be granted registration rights
which are equivalent to the registration rights granted to such other Person
in connection with such acquisition, merger or business combination.
3.8. Amendments to Articles of Incorporation and Bylaws of Celtic
and SLM. Following the Effective Time, the Boards of Directors of each of
Celtic and SLM shall appoint a committee of the Board to study each of such
company=s Articles of Incorporation and Bylaws and to make
recommendations for changes thereto to the full Board of Directors of each
company. The Boards of Directors of both Celtic and SLM shall appoint
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. to such committees.
3.9. Access to Information. If, subsequent to the Effective Time,
Celtic is not required to file, and does not file, with the Securities and
Exchange Commission (ASEC@), the kind of reports (AReports@) it is
currently required to file under the Securities Exchange Act, it shall make
available to the Shareholders the information which would have been available
to the Shareholders if Celtic had filed such Reports with the SEC. However,
the obligation to provide Shareholders such information shall terminate at the
time a Shareholder is no longer a shareholder of Celtic.
3.10. Preemptive Rights. If, after the Effective Time, any Person
who is a Shareholder of Celtic at the Effective Time is granted the preemptive
right to purchase securities of Celtic, the Shareholders shall be granted
equivalent preemptive rights at such time.
3.11. Rules 144 and 144A. Celtic shall timely file the reports
required to be filed by it under the Securities Act and the Securities Exchange
Act and the rules and regulations adopted thereunder and will take such
further action as any Shareholder may reasonably request, all to the extent
required from time to time to enable such Shareholder to sell its Celtic
Common Stock without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities
Act, as such rule may be amended from time to time, or (b) any similar rule
or regulation hereafter adopted by the Securities and Exchange Commission.
Upon the request of any Shareholder, Celtic will deliver to such holder a
written statement as to whether it has complied with the requirements of this
Section 3.11. If Celtic shall at any time not be filing periodic reports under
the Securities Exchange Act Celtic shall, upon the request of any Shareholder,
furnish in writing to such Shareholder Celtic=s most recent fiscal year end
financial statements and Celtic=s most recent quarterly financial statements,
if any, since its last fiscal year end and a description of the nature of the
business of Celtic and the products and services it offers. The fiscal year end
financial statements delivered hereunder shall be audited.
Article IV
Closing
4.1 Closing. Prior to the Effective Time a closing (the "Closing")
of the Transaction shall take place for the purpose of confirming the
satisfaction of, or if permissible, waiver, of the conditions set forth in
Articles VIII and IX hereof. The Closing shall take place within seven days
following the date on which all conditions to each party=s obligations hereunder
have been satisfied or waived and shall be held at such time and place as agreed
to by the parties. However, in no event will the Closing occur subsequent to
January 31, 1997.
4.2. Documents at Closing. At the Closing, the following
transactions shall occur, all of such transactions being deemed to occur
simultaneously:
4.2.1. The Shareholders and SLM will deliver, or cause to
be delivered, to Celtic the following:
(a) Stock certificates for all of the issued and outstanding
stock of SLM duly endorsed;
(b) A certificate from the Division of Corporations of the
State of Utah dated at or about the Effective Date to the effect that
SLM is in good standing under the laws of said state and a
certificate of good standing from the appropriate state authorities of
the state in which each subsidiary of SLM is organized to the effect
that each of such subsidiaries is in good standing in the state in
which it is organized;
(c) An Investment Letter in the form of Exhibit AD@ attached
hereto from each Shareholder representing that he is acquiring the
Celtic Common Stock for investment purposes only and not with a
view to further distribution;
(d) A duly executed Escrow Agreement in the form attached
hereto as Exhibit AC@; and
(e) Such other instruments, documents and certificates as
are required to be delivered pursuant to the provisions of this
Agreement or which may be reasonably requested in furtherance of
the provisions of this Agreement.
4.2.2 Celtic will deliver or cause to be delivered to the
Shareholders:
(a) Certificates for the Celtic Shares to be issued to the
Shareholders;
(b) A duly executed Escrow Agreement in the form attached
hereto as Exhibit AC@.
(c) Duly executed Employment Agreements in the forms
attached hereto as Exhibit AE-1" and AE-2";
(d) Duly executed Option Agreements in the forms attached
hereto as Exhibit AF-1" and AF-2";
(e) A certificate from the Secretary of State of the State
of Delaware dated at or about the Effective Date to the effect that
Celtic is in good standing under the laws of said state and a
certificate of good standing from the appropriate state authorities of
the state in which each subsidiary of Celtic is organized to the
effect that each of such subsidiaries is in good standing in the state
in which it is organized; and
(f) Such other instruments, documents and certificates as
are required to be delivered pursuant to the provisions of this
Agreement or which may be reasonably requested in furtherance of
the provisions of this Agreement.
Article V
Representations and Warranties of
Shareholders and SLM
SLM and each of the Shareholders, individually and neither jointly nor
severally, represents and warrants to Celtic, except as disclosed in this
Agreement or in the case of any representation qualified by its terms to a
particular schedule (ASchedule@) of SLM attached hereto (ASLM Schedule@)
such specific SLM Schedule, that the statements made in this Article V will
be correct and complete at the Effective Time provided, however, if there is
no Effective Time, then no party shall be liable for any inaccuracy. For
purposes of this Article V, each and every reference to SLM shall mean and
include SLM and each subsidiary of SLM (ASLM Subsidiary@) unless
otherwise indicated. Each representation and warranty made by SLM and the
Shareholders relating to SLM, shall be deemed to be a representation and
warranty made by SLM and the Shareholders for each SLM Subsidiary, except
to the extent that a specific representation or warranty does not relate to the
existence, assets, liabilities or operations of such SLM Subsidiary, and that
the term SLM taken as a whole shall mean SLM and all of its Subsidiaries.
5.1. Shareholders. Each of the Shareholders is the owner of all of
the issued and outstanding shares of the capital stock of SLM attributed to
such Shareholder on Exhibit AB@; each Shareholder has full legal title to all
SLM Shares described in Exhibit AB@ as being owned by such Shareholder
free from any and all claims, liens or other encumbrances. Shareholders
have the unqualified right to sell, transfer and dispose of their SLM Shares
subject to the laws of bankruptcy, insolvency and general creditor=s rights.
Each Shareholder represents and warrants that, in regards to such
Shareholder's shares of SLM, such Shareholder has the full right and authority
to execute this Agreement and to transfer his shares of SLM to Celtic.
5.2. Restricted Shares to be Issued. Each Shareholder understands
and is aware that the issuance of Celtic Shares at the Effective Time will be
made without registration under the Securities Act or under any state
securities laws and that the Shares may not be sold or transferred without
registration under the Securities Act and under applicable state securities laws
or unless an exemption from such registration is available. Each Shareholder
understands that the investment in the Celtic Shares is speculative and may
remain so for an indefinite period and each Shareholder hereby represents
that he is able to bear the economic risk of his investment in the Celtic
Shares. All certificates evidencing the Celtic Shares shall bear appropriate
restrictive legends in accordance with Section 2.6.
5.3. Organization. SLM is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah and has all
requisite corporate power and authority to own, lease and operate its assets
and to carry on its business as now being conducted, except where the
failure to be so existing and in good standing or to have such power and
authority would not in the aggregate have a material adverse effect on the
business, operations or financial condition of SLM taken as a whole. SLM
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or jurisdiction which requires such
qualification. Attached hereto as Schedule 5.3 are copies of Good Standing
Certificates and Letters of SLM and the SLM Subsidiaries.
5.3.1. Each SLM Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the state
in which it is organized and has all requisite corporate power and authority
to own, lease and operate its assets and to carry on its business as now
being conducted, except where the failure to be so existing and in good
standing or to have such power and authority would not in the aggregate have
a material adverse effect on the business, operations or financial condition of
such SLM Subsidiary taken as a whole. Each SLM Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing
under the laws of each state or jurisdiction which requires such qualification.
5.4. Capitalization. The entire authorized capital stock of SLM
consists of 1,050,000 shares of common stock having no par value, of which
99,000 shares are currently issued and outstanding and of which not more
than 99,000 will be issued and outstanding at the Effective Time, and 10,000
shares of SLM Preferred Stock having $100.00 par value, of which 1,000
shares are currently issued and outstanding and of which not more than
1,000 will be issued and outstanding at the Effective Time. There are no
outstanding convertible securities, warrants, options, or commitments of any
nature which may cause authorized but unissued shares of SLM Common
Stock to be issued to any Person except as disclosed in Schedule 5.4
attached hereto. At the Effective Time, all issued and outstanding shares of
SLM will have been duly authorized, validly issued, fully paid, and non-
assessable, and not issued in violation of the preemptive or other right of any
Person. None of the outstanding equity securities or other securities of SLM
was issued in violation of the Securities Act or any other Legal Requirement.
5.4.1 Each SLM Subsidiary is a wholly-owned subsidiary
of SLM. The entire authorized and issued capital stock of each SLM
Subsidiary is set out on Schedule 5.4.1. All of the outstanding capital stock
reflected on such Schedule 5.4.1 is owned beneficially and of record by SLM.
There are no outstanding convertible securities, warrants, options or
commitments of any nature which may cause authorized but unissued shares
of capital stock of any SLM Subsidiary to be issued to any Person except as
disclosed in Schedule 5.4.1.
Each share of outstanding capital stock of each SLM Subsidiary has
been duly authorized and validly issued, been fully paid for, is not assessable
and was not issued in violation of the pre-emptive or other rights of any
Person.
5.5. Reorganization and Securities Related Representations.
5.5.1. There is no plan or intention by the Shareholders to
sell, exchange, or otherwise dispose of a number of shares of Celtic Common
Stock received in the Merger that would reduce the Shareholders= ownership
of Celtic stock to a number of shares having a value, as of the date of the
Merger, of less than 50% of the value of all of the formerly outstanding stock
of SLM as of the same date. The SLM Common Stock and shares of Celtic
Common Stock held by the Shareholders and otherwise sold, redeemed, or
disposed of prior or subsequent to the Merger are considered in making this
representation.
5.5.2. Following the Effective Time, SLM will hold at least
90% of the fair market value of its net assets and at least 70% of the fair
market value of its gross assets, and at least 90% of the fair market value of
Celtic Merger Sub=s net assets and at least 70% of the fair market value of
Celtic Merger Sub=s gross assets held immediately prior to the Merger. For
purposes of this representation, amounts used by SLM or Celtic Merger Sub
to pay reorganization expenses, and all redemptions and distributions (except
for regular, normal dividends) made by SLM are included as assets of SLM
or Celtic Merger Sub, respectively, immediately prior to the Merger.
5.5.3. SLM has no plan or intention to issue additional
shares of stock that would result in Celtic losing control of SLM within the
meaning of Section 368(c) of the IRC.
5.5.4. Following the Effective Time, SLM will continue its
historic business or use a significant portion of its historic business assets
in its business.
5.5.5. There is no intercorporate indebtedness existing
between Celtic and SLM, or between Celtic Merger Sub and SLM, which was
issued, acquired, or will be settled at a discount.
5.5.6. At the Effective Time, shares of SLM Common Stock
representing control of SLM as defined in Section 368(c) of the IRC, will be
Exchanged solely for voting stock of Celtic.
5.5.7. At the Effective Time, SLM will not have outstanding
any warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in SLM that, if exercised
or converted, would affect Celtic=s acquisition or retention of control of SLM,
as defined in Section 368(c) of the IRC.
5.5.8. SLM is not an investment company as defined in
Section 368(a)(2)(f)(iii) and (iv) of the IRC.
5.5.9. On the Effective Date, the fair market value of the
assets of SLM will exceed the sum of its liabilities plus the amount of
liabilities, if any, to which the assets are subject.
5.5.10. SLM is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the IRC.
5.5.11. None of the compensation received by any
shareholder-employees of SLM will be separate consideration for, or allocable
to, any of their shares of SLM Common Stock; and the compensation paid
to any shareholder-employees will be for services actually rendered and will
be commensurate with amounts paid to third parties bargaining at arms-length
for similar services.
5.5.12. No Order has been entered revoking or suspending
for cause any license, permit or other authority of any director or officer of
SLM, or of any corporation of which any such Person is an officer or director,
to engage in the securities business or in the sale of a particular security or
temporarily or permanently restraining or enjoining any such Person or any
corporation of which he is an officer or director from engaging in or
continuing any conduct, practice or employment in connection with the
purchase or sale of securities, or convicting such Person of any felony or
misdemeanor involving a security or any aspect of the securities business, or
of any felony.
5.6. Authority Relative to this Agreement. SLM has full corporate
power and authority to execute and deliver this Agreement and to
consummate the Transaction. The execution and delivery of this Agreement
and the consummation of the Transaction have been duly and validly
authorized by the Board of Directors of SLM and have or will be duly and
validly authorized by all of the Shareholders and no other corporate action on
the part of SLM are necessary to authorize this Agreement or to consummate
the Transaction. This Agreement has been duly and validly executed and
delivered by SLM and by each of the Shareholders and constitutes a valid and
binding agreement of SLM and the Shareholders, enforceable against each of
them in accordance with its terms subject to the laws of bankruptcy,
insolvency, general creditor's rights, and equitable principles.
5.7. Approvals and Consents; Non-Contravention.
5.7.1. Except as set forth in Schedule 5.7.1, no material
consent, material approval, or other material action by, or notice to or
material registration or filing with, any governmental or administrative agency
or authority is required or necessary to be obtained by SLM or either
Shareholder in connection with the execution, delivery or performance of this
Agreement by SLM or either Shareholder or the consummation of the
Transaction.
5.7.2. Except as set forth in schedule 5.7.2, no consent,
approval, waiver or other action by any Person under any material Contract
or material instrument, to which SLM or either Shareholder is a party or by
which they or any of their assets are bound, is required or necessary for the
execution, delivery, and performance of this Agreement by SLM or the
consummation of the Transaction. Each Shareholder represents with respect
to himself and not with respect to the other Shareholder, that no consent,
approval, waiver or other action by any Person under any material Contract
or material instrument to which such Shareholder is a party or by which it or
any of its assets is bound, is required or necessary for the execution,
delivery, and performance of this Agreement by SLM and the Shareholders,
or the consummation of the Transaction.
5.7.3. Except as set forth in Schedule 5.7.3, the execution,
delivery, or performance of this Agreement by SLM and the Shareholders and
the consummation of the Transaction will not: (i) violate or conflict with the
charter documents or Bylaws of SLM; (ii) violate or conflict with any law,
regulation, Order or administrative interpretation applicable to SLM or any
Shareholder or by which they or any of their assets are bound, or any
agreement or understanding between any Governmental Body, on the one
hand, and SLM on the other hand; or (iii) violate or conflict with, result in a
breach of, result in or permit the acceleration or termination of, or constitute
a default under any material agreement, material instrument or material
understanding to which SLM is a party or by which it or any of its assets are
bound excluding from the foregoing clauses (ii) and (iii) such violations or
conflicts which, in the aggregate, could not reasonably be expected to have
a material adverse affect on the business, operations or financial condition of
SLM taken as a whole.
Each Shareholder represents that, as to himself, and not as
to any other Shareholder, the execution, delivery and performance of this
Agreement by such Shareholder will not: (i) violate or conflict with any law,
regulation, Order, or administrative interpretation applicable to such
Shareholder or by which it or any of its assets are bound, or any agreement
or understanding between any Governmental Body on the one hand and such
Shareholder on the other hand or (ii) violate or conflict with, result in a
breach of, or result in or permit the acceleration or termination of, or
constitute a default under any material agreement, material instrument or
material understanding to which such Shareholder is a party or by which it or
any of its assets are bound, excluding from the foregoing clause (i) such
violations or conflicts which could not reasonably be expected to have a
material adverse affect on the ability of such Seller to consummate the
Transactions.
5.8. Articles of Incorporation and Bylaws. Attached hereto as
Schedule 5.8 are true and correct copies of the Articles of Incorporation and
Bylaws of SLM and each SLM Subsidiary. Such Articles of Incorporation and
Bylaws are in full force and effect and no amendments are pending. SLM is
not in violation of any provision of its Certificate of Incorporation or Bylaws.
Schedule 5.8 also contains all Board of Director minutes and resolutions and
all shareholder minutes and resolutions of SLM and of each SLM Subsidiary
from the date of their inceptions.
5.9. Financial Statements. Attached hereto as Schedule 5.9 are
unaudited financial statements of SLM and each of the SLM Subsidiaries as
of November 30,1996 (ASLM Management Reports@) and audited financial
statements of SLM (but not the SLM Subsidiaries) for the years ended
February 29, 1996 and February 28, 1995, together with the related footnotes
and report thereon of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ ▇.▇. (the ASLM Audited
Financial Statements@). The SLM Management Reports and the SLM Audited
Financial Statements are hereafter referred to as the ASLM Financial
Statements.@ The parties acknowledge that Celtic is required to file a Form
8-K with the Securities and Exchange Commission within 15 days after the
Effective Date. Such Form 8-K must contain audited and other financial
statements of SLM and any predecessor of SLM which meet the requirements
of such Form 8-K. The SLM Financial Statements are correct and complete
in all material respects and fairly present, in accordance with generally
accepted accounting principles, consistently applied, the financial position of
SLM as of such dates and the results of operations and changes in financial
position for such periods all in accordance with GAAP, (in the case of the
SLM Management Reports, GAAP as applicable to quarterly financial
statements) subject, in the case of the SLM Management Reports, to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be materially adverse) and the absence of the notes (that if
presented would not differ materially from those included in the SLM Audited
Financial Statements).
5.9.1. SLM (i) keeps books, records and accounts that, in
reasonable detail, accurately and fairly reflect (A) the transactions and
dispositions of assets of such entity and (B) the value of inventory calculated
in accordance with GAAP, and (ii) maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (A) transactions are
executed in accordance with management=s general or specific authorization,
(B) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets,
(C) access to assets is permitted only in accordance with management=s
general or specific authorizations, and (D) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
5.9.2. Neither SLM nor any employee, agent, consultant or
representative of SLM has made any payment of funds of SLM or received
or retained any funds in violation of any applicable law, rule or regulation.
5.9.3. Each Shareholder represents as to himself, and not
the other Shareholder, that he has not made any payment of funds of SLM
or received or retained any funds in violation of any applicable law, rule or
regulation.
5.10. No Undisclosed Material Liabilities. SLM is not subject to any
material liability ($20,000 or more) of any kind whatsoever (whether accrued,
absolute, contingent, or otherwise) that are, individually or in the aggregate,
material to SLM taken as a whole other than:
(a) liabilities disclosed or provided for in the most recent
SLM Financial Statements;
(b) liabilities incurred in the Ordinary Course of Business
since the date of the Audited Financial Statements;
(c) liabilities contemplated by and arising under this
Agreement or in connection with the Transaction; and
(d) liabilities described in Schedule 5.10 attached hereto.
To the Knowledge of SLM and the Shareholders, there is no basis for
the imposition of any other liabilities which could reasonably be expected to
have a material adverse effect on the business, properties, assets or
operations of SLM taken as a whole.
5.11. Absence of Certain Changes or Events. Except (i) as
contemplated by this Agreement; and (ii) as disclosed in Schedule 5.11, since
November 30,1996, SLM has not:
(a) suffered any change in its business, operations,
properties, condition (financial or otherwise), or Prospects which has
had, or to Knowledge of SLM or the Shareholders, could reasonably
be expected to have, individually or in the aggregate, a material
adverse effect on the business, properties, assets or operations of
SLM taken as a whole;
(b) suffered any damage, destruction or loss (whether or
not covered by insurance) with respect to any of its properties or
assets which has had, or to the Knowledge of SLM or the
Shareholders, could reasonably be expected to have, individually or
in the aggregate, a material adverse effect on the business,
properties, assets or operations of SLM taken as a whole;
(c) except in the Ordinary Course of Business, incurred any
liability or obligation (absolute, accrued, contingent or otherwise),
in an amount in excess of $20,000;
(d) changed any of its accounting methods, principles or
practices;
(e) revalued any asset, other than due to depreciation or
amortization;
(f) paid, discharged or satisfied any claim, liability or
obligation not reflected in the SLM Financial Statements in an amount
in excess of $20,000;
(g) except in the Ordinary Course of Business, entered into
any commitment or transaction material to SLM taken as a whole in
an amount in excess of $20,000;
(h) declared, set aside or paid any dividend or distribution
in respect of any capital stock, or redeemed, purchased or otherwise
acquired any of these securities or modified its capitalization;
(i) increased or established any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options,
stock appreciation rights, performance awards, or restricted stock
awards), stock purchase or other employee benefit plan, or otherwise
changed the compensation payable or to become payable to any
officer or key employees of SLM;
(j) except in the Ordinary Course of Business, canceled or
written off any debts or waived any claims in an amount in excess
of $20,000;
(k) except in the Ordinary Course of Business, transferred
any assets in an amount in excess of $20,000 or made capital
expenditures and commitments in an amount in excess of $20,000
in the aggregate;
(l) paid or loaned (other than payment of salaries or
benefits or reimbursement of expenses) any amount to, or sold,
transferred or leased any properties or assets to, or entered into
any contract with, any of its officers or directors, or any Affiliate
or Associate of any of its officers or directors;
(m) increased its reserves for bad debts, guaranteed any
obligation, except in the Ordinary Course of Business, or indemnified
any Person; or
(n) agreed (whether or not in writing) to do any of the
foregoing.
5.12. Litigation and Proceedings. Except as set forth in the
Schedule 5.12, there is no claim or Proceeding pending or, to the Knowledge
of any of the Shareholders or SLM, Threatened against SLM or any
Shareholder, or any property or asset of SLM, by any Person or any
Governmental Authority which (i) is reasonably likely to have, individually and
in the aggregate, a material adverse effect on the business, assets or
operations of SLM taken as a whole or (ii) seeks to delay or prevent the
consummation of the Transaction. As of the date hereof, neither SLM nor
any property or asset of SLM, is subject to any Order. To the Knowledge of
SLM and the Shareholders, there is no basis for any claim, action or
Proceeding against SLM which could reasonably be expected to have a
material adverse effect on the business assets, operations or financial
condition of SLM taken as a whole.
5.13. Compliance with Laws, Rules and Regulations. Schedule 5.13
sets forth all material governmental licenses, material permits and other
material Governmental Authorizations (or requests or applications therefor)
pursuant to which SLM carries on its business. To the Knowledge of SLM
and the Shareholders, SLM complies with all applicable federal laws, rules,
regulations and all applicable state and local laws, rules and regulations
relating to the operation of its business, except to the extent that non-
compliance could reasonably be expected to materially and adversely affect
the business, operations, properties, assets or condition of SLM taken as a
whole or except to the extent that non-compliance would not result in the
occurrence of any material liability for SLM taken as a whole.
5.14. Contracts. Schedule 5.14 sets forth a complete and correct
list of all leases and all material Contracts to which SLM is a party or by
which any of its properties or assets are bound. To the Knowledge of SLM
and the Shareholders, and subject to the laws of bankruptcy, insolvency,
general creditor's rights, and equitable principles, all such leases and
Contracts are valid and enforceable in all material respects. For purposes of
this Section 5.14, a AMaterial@ agreement is an agreement which can
reasonably be expected to involve more than $20,000.
5.15. Material Contract Defaults. Except as set forth in Schedule
5.15, to the Knowledge of SLM and the Shareholders, SLM is not in default
under the terms of any outstanding Contract, license, lease, or other
commitment which is material to the business, operations, assets, or
condition of SLM, and no event has occurred or circumstances exist which,
with notice or lapse of time or both, would constitute a default under any
such Contract, license, or other commitment other than any defaults which
could not reasonably be expected to have a material adverse effect on the
business, assets, operations or financial condition of SLM taken as a whole.
5.16. Taxes and Tax Returns. All Tax Returns with respect to taxes
based upon net income filed by SLM since its inception are set forth in
Schedule 5.16 attached hereto. SLM has filed all Tax Returns required to be
filed by it and has paid and discharged all taxes shown as due thereon and
has paid all taxes when due, other than such payments as are being
contested in good faith by appropriate Proceedings and as to which sufficient
reserves have been established. Neither the IRS nor any other taxing authority
or agency, domestic or foreign, is now asserting or, to the Knowledge of SLM
and the Shareholders, has Threatened to assess against SLM, any deficiency
or claim for additional taxes or interest thereon or penalties in connection
therewith. SLM has not granted any waiver of any statute of limitations with
respect to, or agreed to any extension of the period for the assessment of,
any tax. SLM has properly reported on Form 1099 all amounts paid to
consultants and no consultant or other person to whom a payment has been
made by SLM should be classified as an employee under the IRC.
All Tax Returns filed by SLM are true, correct and complete in all
material respects and accurately set forth all items to the extent required to
be reflected or included in such returns by applicable law. SLM is not a party
to any tax sharing agreement.
SLM has not agreed, and is not required, to make any adjustments
pursuant to Section 481(a) of the IRC or any similar provision of state or
local law by reason of a change in accounting method initiated by it or any
other relevant party. To the Knowledge of SLM and each Shareholder, the
IRS has not proposed any such adjustment or change in accounting method.
No application is pending with any taxing authority requesting permission for
any changes in accounting methods that relate to the business or assets of
SLM.
5.16.1. The accruals and reserves for taxes reflected in the
most recent balance sheet (ASLM Balance Sheet@) included in the SLM
Financial Statements are adequate to cover all taxes accruable through such
date (including interest and penalties, if any, thereon) in accordance with
generally accepted accounting principles consistently applied. The term Atax@
or Ataxes@ means federal state, local, foreign, and other taxes, including
without limitation, income taxes, estimated taxes, alternative minimum taxes,
excise taxes, sales taxes, use taxes, value-added taxes, gross receipts taxes,
withholding taxes, stamp taxes, transfer taxes, windfall profit taxes,
environmental taxes and property taxes, whether or not measured in whole or
in part by net income, and all deficiencies, or other additions to tax,
interest, fines and penalties.
5.17. Subsidiaries. Except as set forth in Schedule 5.4.1., SLM has
no Subsidiaries and does not own any capital stock, security, partnership
interest, or other interest of any kind in any corporation, partnership, joint
venture, association, limited liability company or other entity.
5.18. Title and Related Matters. SLM has good and marketable title
to all of its assets which are reflected in the SLM Management Reports or
acquired after that date (except properties, interests in properties, and assets
sold or otherwise disposed of since such date in the Ordinary Course of
Business), free and clear of all mortgages, liens, pledges, charges or
encumbrances, except (i) statutory liens or claims not yet delinquent; (ii) such
imperfections of title and easements as do not and will not materially detract
from or interfere with the present or proposed use of the assets or properties
subject thereto or affected thereby or otherwise materially impair present
business operations on such properties or in connection with such assets;
and (iii) such liens as are described or referred to in the SLM Financial
Statements or in the SLM Schedules. SLM owns, free and clear of any liens,
claims, encumbrances, royalty interests and other restrictions or limitations
of any nature whatsoever, or otherwise has the legal right to use, any and all
procedures, techniques, business plans, methods of management and other
information utilized in the conduct of its business or operations, whether or
not the value thereof is reflected in the SLM Management Reports. The
offices and equipment of SLM that are necessary or used in the operations
of its business are in good operating condition and repair, normal wear and
tear excepted.
5.19. Intellectual Property. Schedule 5.19 hereto contains a
complete list and description of all SLM's United States and foreign (a)
patents and patent applications; (b) trademark registrations and applications
for trademark registrations; (c) copyright registrations and applications for
copyright registrations; (d) unregistered trademarks, trade names, service
marks and copyrights; and (e) unpatented trade secrets. SLM wholly owns
the exclusive rights to all of the above-described intellectual property and
there are no existing, or to the Knowledge of SLM and the Shareholders,
Threatened claims of any third party challenging the ownership, scope or
validity of any of such intellectual property; to the Knowledge of SLM and the
Shareholders, there is no infringing use by any Person or entity of any such
intellectual property; and, except as set forth in Schedule 5.19, to the
Knowledge of SLM and Shareholders, there has been no disclosure of any of
the trade secrets to any Person other than Persons who have executed
confidentiality/non-competition agreements.
5.20. Accounts Receivable. To the Knowledge of SLM and the
Shareholders, all of SLM's accounts receivable arose in the Ordinary Course
of Business, are "arms length" (other than employee advances which are
described in Schedule 5.20), bona fide and correctly reflected in SLM's books
and records. To the Knowledge of SLM and the Shareholders, all of SLM's
accounts receivable (net of reserves for doubtful accounts set forth on SLM's
financial records) are collectible in accordance with their terms. To the
Knowledge of SLM and the Shareholders, none of SLM's accounts receivable
is subject to any set off, counterclaim or adjustment by reason of any product
liability, breach of warranty, Contract, accounting error or other claim except
for adjustments resulting from the settlement of escrows, none of which is
material.
5.21. Insurance. SLM currently maintains the insurance policies
described on the attached Schedule 5.21 which sets out the type of
insurance, insurer, policy number, expiration date, whether such insurance is
written on a claims made or occurrence basis, the deductible and policy limit.
5.22. Environmental Matters.
5.22.1. Neither SLM nor any predecessor of SLM (i) has
violated or is in violation of any Environmental Law; (ii) has owned or leased
properties (including, without limitation, soils and surface and ground waters)
which are contaminated with any Hazardous Substance; (iii) is liable for any
off-site contamination; (iv) actually or potentially (other than as a result of
a foreclosure action of a mortgage interest) or, to the Knowledge of SLM and
the Shareholders, liable under any Environmental Law (including, without
limitation, pending or Threatened liens); (v) has failed to obtain all permits,
licenses and other authorization required to be obtained by it under any
Environmental Law (ASLM Environmental Permits@); and (vi) has failed to be
in compliance with the SLM Environmental Permits.
5.22.2. To the Knowledge of SLM and the Shareholders,
neither SLM nor any of its predecessors, or their respective subsidiaries or
joint ventures have any material Environmental Liabilities, and none of such
entities has had within the five (5) years preceding the date hereof a material
release of Hazardous Substances into the environment in violation of any
Environmental Law or Environmental Permit.
5.22.3. For the purposes of this Section 5.22, the
following terms have the following meanings:
"Environmental Laws" shall mean any and all Federal, state
and local laws (including case law), regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements and
governmental restrictions relating to (i) human health, the
environment or to emissions, discharges or releases of pollutants,
contaminants, Hazardous Substances or wastes into the environment;
(ii) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or wastes or the clean-up or other remediation
thereof; or (iii) the pollution of the environment or the protection
of human health.
"Environmental Liabilities" shall mean all liabilities,
whether vested or unvested, contingent or fixed, which (i) arise under
or relate to Environmental Laws and (ii) relate to actions occurring
or conditions existing on or prior to the Effective Time.
"Hazardous Substances" shall mean (i) those substances
defined in or regulated under the following federal statutes and their
state counterparts, as each may be amended from time to time, and
all regulations thereunder: the Hazardous Materials Transportation
Act, the Resources Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability
Act, the Clean Air Act, the Safe Drinking Water Act (Clean Water
Act), the Atomic Energy Act, the Federal Insecticide, Fungicide, and
Rodenticide Act and the Substances Control Act; (ii) petroleum and
petroleum products including crude oil and any fractions thereof;
(iii) natural gas, synthetic gas, natural gas liquids and any mixtures
thereof; (iv) radon; (v) any other contaminant; and (vi) any substance
with respect to which a Governmental Authority requires
environmental investigation, monitoring, reporting or remediation
5.23. Employees. Schedule 5.23 contains a complete and
accurate list of the following information for each employee, consultant,
representative (excluding real estate agents and loan officers) or director of
SLM, including each employee on leave of absence or layoff status: employer;
name; job title; current compensation paid or payable and any change in
compensation since December 31, 1995; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under any
pension, retirement, profit-sharing, thrift-savings, deferred compensation,
stock bonus, stock option, cash bonus, employee stock ownership (including
investment credit or payroll stock ownership), severance pay, insurance,
medical, welfare, or vacation plan, other employee pension benefit plan or
employee welfare benefit plan, or any other employee benefit plan or any
director plan.
5.23.1. No employee, consultant, representative or director
of SLM is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, non-competition, or proprietary
rights agreement, between such employee, consultant, representative or
director and any other Person ("Proprietary Rights Agreement") that in any
way materially adversely affects or could reasonably be expected to materially
adversely affect (i) the performance of his duties as an employee or director
of SLM, or (ii) the ability of SLM to conduct its business. To the Knowledge
of SLM and Shareholders, no director, officer, or other key employee of SLM
intends to terminate his employment with SLM; provided, however, that for
purposes of this Section 5.23.1, neither SLM nor any Shareholder shall be
deemed to be obligated to make any inquiry of any director, officer or key
employee concerning their intention to terminate their employment with SLM.
5.24. Relationships with Associates and Affiliates. Except as set
forth in Schedule 5.24, no Shareholder nor any Associate or Affiliate of any
Shareholder has, or since January 1, 1994 has had, any interest in any
property (whether real, personal, or mixed and whether tangible or intangible),
used in or pertaining to SLM. Except as set forth in Schedule 5.24, no
Shareholder nor any Associate or Affiliate of any Shareholder is, or since
January 1, 1994 has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction with SLM,
other than business dealings or transactions conducted in the Ordinary Course
of Business at substantially prevailing market prices and on substantially
prevailing market terms, or (ii) engaged in competition with SLM with respect
to any line of the products or services of SLM (a "Competing Business") in
any market presently served by SLM. Except as set forth in Schedule 5.24,
no Shareholder and no Associate or Affiliate of any Shareholder is a party to
any Contract with, or has any claim or right against, SLM.
5.25. Brokers. Neither SLM nor any Shareholder, has incurred nor
will any of them incur, any brokerage, finder's, or similar fee in connection
with the Transaction.
5.26. SLM Schedules. Prior to Closing, SLM shall deliver to Celtic
the following schedules (collectively "SLM Schedules") which consist of
separate schedules dated as of the date of execution of this Agreement and
instruments and data as of such date, all certified by the chief executive
officer of SLM and by the Shareholders as complete, true, and correct in all
material respects:
(a) A Schedule containing copies of Good Standing
Certificates and Letters of SLM and the SLM Subsidiaries (Schedule
5.3).
(b) A Schedule describing any and all options, warrants
or other rights to purchase the securities of SLM, together with
copies of any documents relating thereto (Schedule 5.4);
(c) A Schedule describing the authorized and issued
capital stock of each SLM Subsidiary and the owners thereof, and a
description of any outstanding warrant, option or other right to
purchase the securities of each SLM Subsidiary (Schedule 5.4.1);
(d) A Schedule describing required notifications
regarding change of control (Schedule 5.7.1);
(e) A Schedule describing required notifications
regarding change of control (Schedule 5.7.2);
(f) A Schedule describing required notifications
regarding change of control (Schedule 5.7.3);
(g) A Schedule containing complete and correct copies of
the Articles of Incorporation and Bylaws, as amended, of SLM and
each SLM Subsidiary in effect as of the date of this Agreement and
all Board of Director and Shareholder minutes and resolutions
adopted since their respective incorporations (Schedule 5.8);
(h) A Schedule including SLM Financial Statements
(Schedule 5.9);
(i) A Schedule of all liabilities (which are in the amount
of $20,000 or more) included on the SLM Financial Statements or
arising thereafter. This Schedule shall be updated as of the
Effective Date and such updated Schedule shall be delivered to Celtic
immediately prior to the Effective Time (Schedule 5.10);
(j) A Schedule setting forth a description of any material
adverse change in the business, operations, property, inventory,
assets, or condition of SLM since the date of SLM Financial
Statements (Schedule 5.11);
(k) A Schedule describing any and all litigation or
proceeding to which SLM is a party or Threatened to be party or which
may otherwise affect SLM, its business or assets (Schedule 5.12);
(l) A Schedule describing all material governmental
licenses, material permits and other material Governmental
Authorizations (or requests or applications therefor) pursuant to
which SLM carries on or proposes to carry on its business (except
those which, in the aggregate, are immaterial to the present or
proposed business of SLM) (Schedule 5.13);
(m) A Schedule containing a description of all leases
and all material Contracts of SLM (Schedule 5.14);
(n) A Schedule relating to Material Contract defaults
(Schedule 5.15);
(o) A Schedule containing copies of all Tax Returns of
SLM (Schedule 5.16);
(p) A Schedule of all intellectual property owned by SLM
(Schedule 5.19);
(q) A Schedule describing all employee advances
(Schedule 5.20);
(r) A Schedule of all insurance maintained by SLM
(Schedule 5.21);
(s) A Schedule containing copies of employee
information (Schedule 5.23);
(t) A Schedule describing transactions with
Shareholders, Associates or Affiliates (Schedule 5.24);
(u) A Schedule of all other documents, disclosures, or
representations required to be disclosed by this Agreement or
required to be disclosed in order to set forth all material facts
regarding SLM.
5.26.1. The SLM Schedules delivered pursuant this
Agreement are qualified in their entirety by reference to specific provisions of
this Agreement, and are not intended to constitute, and shall not be construed
as constituting, independent representations and warranties of the
Shareholders to any extent. The SLM Schedules may include items or
information which the Shareholders are not required to disclose under this
Agreement; disclosure of such items or information shall not affect (directly
or indirectly) the interpretation of this Agreement or the scope of the
disclosure obligation under this Agreement, including, without limitation, any
assessment of whether any matter arose or any agreement was entered into
in the Ordinary Course of Business. Inclusion of information herein shall not
be construed to establish a specific definition or level of what is material to
the business, assets, financial position, operations or results of operations of
SLM other than what is provided in the representations or warranties
themselves.
5.26.2. SLM may provide additional schedules to qualify one
or more of the representations and warranties of SLM and the Shareholders
in whole or in part and any such Schedule so delivered in accordance with
Section 5.26 shall constitute an SLM Schedule and qualify and limit the
representations and warranties of SLM and the Shareholders for all purposes
of this Agreement to the same extent as if such Schedule were referred to in
this Agreement. The descriptions of the SLM Schedules set out in this
Section 5.26 are for convenience of reference only and not intended to
modify, or to constitute additional, representations or warranties to any extent
or for any purpose. In the event of any discrepancy or conflict between the
description of an SLM Schedule as set out in this Section 5.26 and the actual
language of the representation or warranty, the actual language of the
representation or warranty shall control for all purposes and this Section 5.26
shall not be used to interpret their meaning to any extent or for any purpose.
5.27. Information. Each Shareholder represents unto himself and not
as to the other Shareholder that he has not failed to disclose any information
known to such Shareholder relating to SLM that is material to a decision to
purchase the SLM Shares. To the Knowledge of each Shareholder, none of
the representations or warranties contained in Article V of this Agreement
contain any untrue statement of material fact or omits to state a material fact
required to make the statements contained therein not misleading in light of
the circumstances under which they were made.
5.28. Limitation on Liability. Notwithstanding anything to the
contrary contained in this Agreement, neither SLM nor either of the
Shareholders shall have any liability for any misrepresentation or breach of
any representation or warranty contained in this Article V if Celtic has actual
knowledge (rather than Knowledge) of such misrepresentation or breach.
Article VI
Representations And Warranties of Celtic
Celtic represents and warrants to SLM and to each Shareholder
except as disclosed in this Agreement or in the case of any representation
qualified by its terms to a particular schedule (ASchedule@) of Celtic (ACeltic
Schedule@), such specific Celtic Schedule, that the statements made in this
Article VI will be correct and complete at the Effective Time provided,
however, that if there is no Effective Time, then no party shall be liable for
any inaccuracy. For purposes of this Article VI, each and every reference to
Celtic shall mean and include Celtic and each subsidiary of Celtic (ACeltic
Subsidiary@) unless otherwise indicated. Each representation and warranty
made by Celtic relating to Celtic shall be deemed to be a representation and
warranty made by Celtic for each Celtic Subsidiary, except to the extent that
a specific representation or warranty does not relate to the existence, assets,
liabilities or operations of each Celtic Subsidiary.
6.1. Organization. Celtic is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, except
where the failure to be so existing and in good standing or to have such
power and authority would not in the aggregate have a materially adverse
effect on the business, operations or financial condition of Celtic taken as a
whole, and that the term Celtic taken as a whole shall mean Celtic and all of
its Subsidiaries. Celtic is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or
jurisdiction which requires such qualification. Attached hereto as Schedule
6.1 are copies of Good Standing Certificates of Celtic and the Celtic
Subsidiaries.
6.1.1. Each Celtic Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the state
in which it is organized and has all requisite corporate power and authority
to own, lease and operate its assets and to carry on its business as now
being conducted, except where the failure to be so existing and in good
standing or to have such power and authority would not in the aggregate have
a material adverse effect on the business, operations or financial condition of
such Celtic Subsidiary taken as a whole. Each Celtic Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing
under the laws of each state or jurisdiction which requires such qualification.
6.2. Capitalization. The entire authorized capital stock of Celtic
consists of 25,000,000 shares of common stock, $.001 par value of which
3,306,471 shares are currently issued and outstanding. Celtic also has
7,500,000 shares of Preferred Stock authorized, none of which are issued or
outstanding. There are no outstanding convertible securities, warrants,
options, or commitments of any nature which may cause authorized but
unissued shares of Celtic Common Stock or Preferred Stock to be issued to
any Person except as disclosed in Schedule 6.2 attached hereto. From and
at the Effective Time, all issued and outstanding shares of Celtic will have
been duly authorized, validly issued, fully paid, and non-assessable, and not
issued in violation of the pre-emptive or other right of any Person. None of
the outstanding equity securities or other securities of Celtic was issued in
violation of the Securities Act or any other Legal Requirement.
6.2.1 Each Celtic Subsidiary is a wholly-owned subsidiary
of Celtic. Schedule 6.2 sets out a list of all registration rights and
preemptive rights granted by Celtic to any holder of its capital stock or any
convertible securities, warrants, options or commitments of any nature which may
require Celtic to issue any shares of Celtic Common Stock. Celtic is not
obligated to repurchase or redeem any of its outstanding shares of capital stock
or any share of its capital stock which may become issuable upon exercise of any
rights under any convertible securities, warrants, options or commitments of
any nature which may require Celtic to issue any shares of Celtic Common
Stock.
6.3. Authority Relative to this Agreement. Each of Celtic and Celtic
Merger Sub has the full corporate power and authority to execute and deliver
this Agreement and to consummate the Transaction which includes, but is not
limited, the issuance of the Celtic Common Stock to the Shareholders in the
Merger, the execution and delivery of Employment Agreements, the execution
and delivery of Option Agreements and the execution and delivery of an
Escrow Agreement. The execution and delivery of this Agreement and the
consummation of the Transaction have been duly and validly authorized by
the Board of Directors of Celtic and Celtic Merger Sub, and no other
corporate action on the part of Celtic or Celtic Merger Sub are necessary or
required to authorize this Agreement or to consummate the Transaction. This
Agreement has been duly and validly executed and delivered by Celtic and
constitutes a valid and binding agreement of Celtic, enforceable against it in
accordance with its terms subject to the laws of bankruptcy, insolvency,
general creditor's rights, and equitable principles.
6.4. Reorganization and Securities Related Representations.
6.4.1. The fair market value of the Celtic Common Stock
received by each Shareholder of SLM in the Merger will be approximately
equal to the fair market value of the SLM Common Stock surrendered in the
Exchange.
6.4.2. Following the Effective Time, SLM will hold at least
90% of the fair market value of its net assets and at least 70% of the fair
market value of its gross assets, and at least 90% of the fair market value of
Celtic Merger Sub=s net assets and at least 70% of the fair market value of
Celtic Merger Sub=s gross assets held immediately prior to the Merger. For
purposes of this representation, amounts used by SLM or Celtic Merger Sub
to pay reorganization expenses, and all redemptions and distributions (except
for regular, normal dividends) made by SLM are included as assets of SLM
or Celtic Merger Sub, respectively, immediately prior to the Effective Time.
6.4.3. Immediately prior to the Effective Time, Celtic will
be in control of Celtic Merger Sub within the meaning of Section 368(c) of the
IRC.
6.4.4 Celtic has no plan or intention to reacquire any of
its stock issued in the Merger.
6.4.5. Celtic has no plan or intention to liquidate SLM, to
merge SLM with or into another corporation; to sell or otherwise dispose of
the stock of SLM except for transfers of stock to corporations controlled by
Celtic; or to cause SLM to sell or otherwise dispose of any of its assets or
any of the assets acquired from Celtic Merger Sub, except for dispositions
made in the Ordinary Course of Business or transfers of assets to a
corporation controlled by SLM.
6.4.6. Celtic Merger Sub will have no liabilities assumed
by SLM and will not transfer to SLM any assets subject to liabilities in the
Merger.
6.4.7. Following the Effective Time, SLM will continue its
historic business or use a significant portion of its historic business assets
in its business.
6.4.8. There is no intercorporate indebtedness existing
between Celtic and SLM, or between Celtic Merger Sub and SLM, which was
issued, acquired, or will be settled at a discount.
6.4.9. In the Merger, shares of SLM stock representing
control of SLM as defined in Section 368(c) of the IRC, will be Exchanged
solely for voting stock of Celtic.
6.4.10. Celtic does not own, nor has it owned during the
past five years, any shares of the stock of SLM.
6.4.11. Celtic is not an investment company as defined in
Section 368(a)(2)(f)(iii) and (iv) of the IRC.
6.4.12. None of the compensation received by any
shareholder-employees of SLM will be separate consideration for, or allocable
to, any of their shares of SLM stock; and the compensation paid to any
shareholder-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arms-length
for similar services.
6.4.13. No Order has been entered revoking or
suspending for cause any license, permit or other authority of any director or
officer of Celtic, or of any corporation of which such Person is an officer or
director, to engage in the securities business or in the sale of a particular
security or temporarily or permanently restraining or enjoining any such
Person or any corporation of which he is an officer or director from engaging
in or continuing any conduct, practice or employment in connection with the
purchase or sale of securities, or convicting such Person of any felony or
misdemeanor involving a security or any aspect of the securities business, or
of any felony.
6.5. Approvals and Consents; Non-Contravention.
6.5.1. No material consent, material approval, or other
material action by, or notice to a material registration or filing with, any
governmental or administrative agency or authority is required or necessary
to be obtained by Celtic in connection with the execution, delivery or
performance of this Agreement by Celtic or the consummation of the
transactions contemplated by this Agreement.
6.5.2. No consent, approval, waiver or other action by any
Person under any material Contract or material instrument to which Celtic is
a party or by which it or any of its assets are bound, is required or necessary
for the execution, delivery, and performance of this Agreement by Celtic or the
consummation of the Transaction.
6.5.3. The execution, delivery, or performance of this
Agreement by Celtic and the consummation of the Transactions contemplated
by this Agreement will not: (i) violate or conflict with the charter documents
or Bylaws of Celtic (ii) violate or conflict with any law, regulation, Order or
administrative interpretation applicable to Celtic or by which it or any of its
assets are bound, or any agreement or understanding between any
Governmental Body, on the one hand, and Celtic on the other hand; or (iii)
violate or conflict with, result in a breach of, result in or permit the
acceleration or termination of, or constitute a default under any material
agreement, material instrument or material understanding to which Celtic is
a party or by which it or any of its assets are bound excluding from the
foregoing clauses (ii) and (iii) such violations or conflicts which, in the
aggregate, could not reasonably be expected to have a material adverse affect
on the business, operations or financial condition of Celtic taken as a whole.
6.6. Certificate of Incorporation and Bylaws. Attached hereto as
Schedule 6.6 are true and correct copies of the Certificate of Incorporation
and Bylaws of Celtic and each Celtic Subsidiary. Such Certificate of
Incorporation and Bylaws are in full force and effect and no amendments are
pending. Celtic is not in violation of any provision of its Certificate of
Incorporation or Bylaws. Schedule 6.6 also contains all Board of Director
minutes and resolutions and all Shareholder minutes and resolutions of Celtic
and of each Celtic Subsidiary from the date of their inceptions.
6.7 Financial Statements. Attached hereto as Schedule 6.7 are
unaudited consolidated financial statements of Celtic (excluding Celtic Merger
Sub which is recently formed, has no assets and no liabilities) as of
September 30, 1996 (ACeltic Management Reports@) and audited
consolidated financial statements for the years ended June 30, 1996 and June
30, 1995, together with the related footnotes and report thereon of the
auditors rendering such reports (the ACeltic Audited Financial Statements@).
The Celtic Management Reports and the Celtic Audited Financial Statements
are hereafter referred to as the ACeltic Financial Statements.@ The Celtic
Financial Statements are correct and complete in all respects and fairly
present, in accordance with generally accepted accounting principles,
consistently applied, the consolidated financial position of Celtic as of such
dates and the results of operations and changes in financial position for such
periods all in accordance with GAAP, subject, in the case of the Management
Reports, to normal recurring year end adjustments (the effect of which will
not, individually or in the aggregate, be materially adverse) and the absence
of the notes (that if presented would not differ materially from those included
in the Celtic Audited Financial Statements).
6.7.1. Celtic (i) keeps books, records and accounts that, in
reasonable detail, accurately and fairly reflect (A) the transactions and
dispositions of assets of such entity and (B) the value of inventory calculated
in accordance with GAAP, and (ii) maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (A) transactions are
executed in accordance with management=s general or specific authorization,
(B) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets,
(C) access to assets is permitted only in accordance with management=s
general or specific authorizations, and (D) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
6.7.2. Neither Celtic nor any employee, agent, consultant
or representative of Celtic has made any payment of funds of Celtic or
received or retained any funds in violation of any applicable law, rule or
regulation.
6.8. No Undisclosed Material Liabilities. Celtic is not subject to
any material liability ($50,000 or more), whether accrued, absolute, contingent
or otherwise that are, individually or in the aggregate, material to Celtic
taken as a whole other than:
(a) liabilities disclosed or provided for in the most recent
Celtic Financial Statements;
(b) liabilities incurred in the Ordinary Course of Business
since the date of the Audited Financial Statements;
(c) liabilities contemplated by and arising under this
Agreement or in connection with the Transaction; and
(d) liabilities described in Schedule 6.8 attached hereto.
To the Knowledge of Celtic no circumstances exist which would
result in the imposition of any other liabilities.
6.9. Absence of Certain Changes or Events. Except (i) as
contemplated by this Agreement; (ii) as disclosed in Schedule 6.9 since
September 30,1996, Celtic has not:
(a) suffered any change in its business, operations,
properties, condition (financial or otherwise), or Prospects which has
had, or to Knowledge of Celtic could reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the
business, properties, assets or operations of Celtic taken as a whole;
(b) suffered any damage, destruction or loss (whether or
not covered by insurance) with respect to any of its properties or
assets which has had, or to the Knowledge of Celtic, could
reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the business, properties, assets or
operations of Celtic taken as a whole;
(c) except in the Ordinary Course of Business, incurred any
liability or obligation (absolute, accrued, contingent or otherwise),
in an amount in excess of $50,000;
(d) changed any of its accounting methods, principles or
practices;
(e) revalued any asset, other than due to depreciation or
amortization;
(f) paid, discharged or satisfied any claim, liability or
obligation not reflected in the Celtic Financial Statements in an
amount in excess of $50,000;
(g) except in the Ordinary Course of Business, entered into
any commitment or transaction material to Celtic taken as a whole
in an amount in excess of $50,000;
(h) declared, set aside or paid any dividend or distribution
in respect of any capital stock, or redeemed, purchased or otherwise
acquired any of these securities or modified its capitalization;
(i) increased or established any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options,
stock appreciation rights, performance awards, or restricted stock
awards), stock purchase or other employee benefit plan, or otherwise
changed the compensation payable or to become payable to any
officer or key employees of Celtic;
(j) except in the Ordinary Course of Business, canceled or
written off any debts or waived any claims in an amount in excess
of $50,000;
(k) except in the Ordinary Course of Business, transferred
any assets in an amount in excess of $50,000 or made capital
expenditures and commitments in an amount in excess of $50,000
in the aggregate;
(l) paid or loaned (other than payment of salaries or
benefits or reimbursement of expenses) any amount to, or sold,
transferred or leased any properties or assets to, or entered into any
contract with, any of its officers or directors, or any affiliate or
Associate of any of its officers or directors;
(m) increased its reserves for bad debts, guaranteed any
obligation, except in the Ordinary Course of Business, or indemnified
any Person; or
(n) agreed (whether or not in writing) to do any of the
foregoing.
6.10. Litigation and Proceedings. Except as set forth in the
Schedule 6.10, there is no claim or Proceeding pending or, to the Knowledge
of Celtic, Threatened against Celtic, or any property or asset of Celtic by any
Person or any Governmental Authority which (i) is reasonably likely to have,
individually and in the aggregate, a material adverse effect on the business,
assets or operations of Celtic or (ii) seeks to delay or prevent the
consummation of the Transaction. As of the date hereof, neither Celtic nor
any property or asset of Celtic, is subject to any Order. To the Knowledge
of Celtic, there is no basis for any claim, action or Proceeding against Celtic
which could reasonably be expected to have a material adverse effect on the
business assets, operations or financial condition of Celtic. Celtic has never
been a party to any Proceeding involving shareholder litigation nor has it been
a party to any Proceeding initiated by the Securities and Exchange
commission or any state securities agency.
6.11. Compliance with Laws, Rules and Regulations. Schedule
6.11 sets forth all material, governmental licenses, material permits and other
material Governmental Authorizations (or requests or applications therefore)
pursuant to which Celtic carries on its business. To the Knowledge of Celtic,
it complies with all applicable federal laws, rules, regulations and all
applicable state and local laws, rules and regulations relating to the operation
of its business, except to the extent that non-compliance could reasonably be
expected to materially and adversely affect the business, operations,
properties, assets or condition of Celtic or except to the extent that non-
compliance would not result in the occurrence of any material liability for
Celtic.
6.11.1 Celtic has made all filings with the United States
Securities and Exchange Commission (ASEC@) that it has been required to
make under the Securities Act and the Securities Exchange Act. The
documents (including Celtic Financial Statements contained therein) filed with
the SEC, except as amended, complied in all material respects with the
requirements of the Securities Act and the Securities Exchange Act and to the
Knowledge of the Company none of such documents contained an untrue
statement a of material fact or omitted to state a material fact required to be
stated therein to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Schedule
6.11.1 is a true, correct and complete list of all filings made by or with
respect to Celtic or Celtic Common Stock since January 1, 1994 and a true,
correct and complete copy of all such filings has been provided to SLM.
6.12. Contracts. Schedule 6.12 sets forth a complete and correct
list of all leases and all material Contracts to which Celtic is a party or by
which any of its properties or assets are bound. To the Knowledge of Celtic,
and subject to the laws of bankruptcy, insolvency, general creditor's rights,
and equitable principles, all such leases and Contracts are valid and
enforceable in all material respects. For purposes of this Section 6.12, a
AMaterial@ agreement is an agreement which can reasonably be expected to
involve more than $50,000.
6.13. Material Contract Defaults. To the Knowledge of Celtic, it is
not in default under the terms of any outstanding Contract, license, lease, or
other commitment which is material to the business, operations, assets, or
condition of Celtic and no event has occurred or circumstances exist which,
with notice or lapse of time or both, would constitute a default under any
such Contract, license, or other commitment other than any defaults which
could not reasonably be expected to have a material adverse effect on the
business, assets, operations or financial condition of Celtic taken as a whole.
6.14. Taxes and Tax Returns. All Tax Returns with respect to taxes
based upon net income filed by Celtic since January 1, 1994, are set forth in
Schedule 6.14 attached hereto. Celtic has filed all Tax Returns required to be
filed by it and has paid and discharged all taxes shown as due thereon and
has paid all taxes when due, other than such payments as are being
contested in good faith by appropriate Proceedings and as to which sufficient
reserves have been established. Neither the IRS nor any other taxing authority
or agency, domestic or foreign, is now asserting or, to the Knowledge of
Celtic, has Threatened to assess against Celtic any deficiency or claim for
additional taxes or interest thereon or penalties in connection therewith.
Celtic has not been granted any waiver of any statute of limitations with
respect to, or agreed to any extension of the period for the assessment of, any
tax. Celtic has properly reported on Form 1099 all amounts paid to consultants
and no consultant or other person to whom a payment has been made by
Celtic should be classified as an employee under the IRC.
All Tax Returns filed by Celtic are true, correct and complete in all
material respects and accurately set forth all items to the extent required to
be reflected or included in such returns by applicable law. Celtic is not a
party to any tax sharing agreement.
Celtic has not agreed, and is not required, to make any adjustments
pursuant to Section 481(a) of the IRC or any similar provision of state or
local law by reason of a change in accounting method initiated by it or any
other relevant party. To the Knowledge of Celtic, the IRS has not proposed
any such adjustment or change in accounting method. No application is
pending with any taxing authority requesting permission for any changes in
accounting methods that relate to the business or assets of Celtic.
6.14.1. The accruals and reserves for taxes reflected in the
most recent balance sheet (ACeltic Balance Sheet@) included in the Celtic
Financial Statements are adequate to cover all taxes accruable through such
date (including interest and penalties, if any, thereon) in accordance with
generally accepted accounting principles consistently applied. The term Atax@
or Ataxes@ means federal state, local, foreign, and other taxes, including
without limitation, income taxes, estimated taxes, alternative minimum taxes,
excise taxes, sales taxes, use taxes, value-added taxes, gross receipts taxes,
withholding taxes, stamp taxes, transfer taxes, windfall profit taxes,
environmental taxes and property taxes, whether or not measured in whole or
in part by net income, and all deficiencies, or other additions to tax,
interest, fines and penalties.
6.15. Subsidiaries. Except as set forth in Schedule 6.15, Celtic
has no Subsidiaries and does not own any capital stock, security, partnership
interest, or other interest of any kind in any corporation, partnership, joint
venture, association, limited liability company or other entity.
6.16. Title and Related Matters. Celtic has good and marketable title
to all of its assets which are reflected in the Celtic Management Reports or
acquired after that date (except properties, interests in properties, and assets
sold or otherwise disposed of since such date in the Ordinary Course of
Business), free and clear of all mortgages, liens, pledges, charges or
encumbrances, except (i) statutory liens or claims not yet delinquent; (ii) such
imperfections of title and easements as do not and will not materially detract
from or interfere with the present or proposed use of the assets or properties
subject thereto or affected thereby or otherwise materially impair present
business operations on such properties or in connection with such assets;
and (iii) such liens as are described or referred to in the Celtic Financial
Statements or in the Celtic Schedules. Celtic owns, free and clear of any
liens, claims, encumbrances, royalty interests and other restrictions or
limitations of any nature whatsoever, or otherwise has the legal right to use,
any and all procedures, techniques, business plans, methods of management
and other information utilized in the conduct of its business or operations,
whether or not the value thereof is reflected in the Celtic Management
Reports. The offices and equipment of Celtic that are necessary or used in the
operations of its business are in good operating condition and repair, normal
wear and tear excepted.
6.17. Intellectual Property. Schedule 6.17 hereto contains a
complete list and description of all Celtic=s United States and foreign (a)
patents and patent applications; (b) trademark registrations and applications
for trademark registrations; (c) copyright registrations and applications for
copyright registrations; (d) unregistered trademarks, trade names, service
marks and copyrights; and (e) unpatented trade secrets. Celtic wholly owns
the exclusive rights to all of the above-described intellectual property and
there are no existing or to the Knowledge of Celtic, Threatened claims of any
third party challenging the ownership, scope or validity of any of the said
intellectual property; to the Knowledge of Celtic, there is no infringing use by
any Person or entity of any of such intellectual property; and, except as set
forth in Schedule 6.17, to the Knowledge of Celtic, there has been no
disclosure of any of the trade secrets to any Person other than Persons who
have executed confidentiality/non-competition agreements.
6.18. Accounts Receivables. To the Knowledge of Celtic, all of its
accounts receivable arose in the Ordinary Course of Business, are "arms
length" (other than employee advances which are described in Schedule
6.18), bona fide and are correctly reflected in Celtic's books and records. To
the Knowledge of Celtic, all of its accounts receivable (net of reserves for
doubtful accounts set forth on Celtic=s financial records) are collectible in
accordance with their terms. To the Knowledge of Celtic, none of Celtic's
accounts receivable is subject to any set off, counterclaim or adjustment by
reason of any product liability, breach of warranty, Contract, accounting error
or other claim except for adjustments in the Ordinary Course of Business,
none of which is material.
6.19. Insurance. Celtic currently maintains the insurance policies
described on the attached Schedule 6.19 which sets out the type of
insurance, insurer, policy number, expiration date, whether such insurance is
written on a claims made or occurrence basis, the deductible and policy limit.
6.20. Environmental Matters.
6.20.1. Neither Celtic nor any predecessor of Celtic (i)
has violated or is in violation of any Environmental Law; (ii) has owned or
leased properties (including, without limitation, soils and surface and ground
waters) which are contaminated with any Hazardous Substance; (iii) is liable for
any off-site contamination; (iv) is actually or potentially (other than as a
result of the foreclosure action of a mortgage interest) or, to the Knowledge of
Celtic, liable under any Environmental Law (including, without limitation,
pending or Threatened liens); (v) has failed to obtain all permits, licenses and
other authorization required to be obtained by it under any Environmental Law
(A Celtic Environmental Permits@); and (vi) Celtic has failed to be in
compliance with Celtic Environmental Permits.
6.20.2. To the Knowledge of Celtic neither Celtic nor any of
its predecessors, or their respective subsidiaries or joint ventures have any
material Environmental Liabilities, and none of such entities have had within
the five (5) years preceding the date hereof a material release of Hazardous
Substances into the environment in violation of any Environmental Law or
Environmental Permit.
6.20.3. For the purposes of this Section 6.19, the
following terms have the following meanings:
"Environmental Laws" shall mean any and all Federal, state
and local laws (including case law), regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements and
governmental restrictions relating to (i) human health, the
environment or to emissions, discharges or releases of pollutants,
contaminants, Hazardous Substances or wastes into the environment;
(ii) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or wastes or the clean-up or other remediation
thereof; or (iii) the pollution of the environment or the protection
of human health.
"Environmental Liabilities" shall mean all liabilities,
whether vested or unvested, contingent or fixed, which (i) arise under
or relate to Environmental Laws and (ii) relate to actions occurring
or conditions existing on or prior to the Effective Time.
"Hazardous Substances" shall mean (i) those substances
defined in or regulated under the following federal statues and their
state counterparts, as each may be amended from time to time, and
all regulations thereunder: the Hazardous Materials Transportation
Act, the Resources Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability
Act, the Clean Air Act, the Safe Drinking Water Act (Clean Water
Act), the Atomic Energy Act, the Federal Insecticide, Fungicide, and
Rodenticide Act and the Substances Control Act; (ii) petroleum and
petroleum products including crude oil and any fractions thereof;
(iii) natural gas, synthetic gas, natural gas liquids and any mixtures
thereof; (iv) radon; (v) any other contaminant; and (vi) any substance
with respect to which a Governmental Authority requires
environmental investigation, monitoring, reporting or remediation.
6.21. Employees. Schedule 6.21 contains a complete and
accurate list of the following information for each employee, consultant,
representative (excluding non-affiliated brokers or agents) or director of
Celtic, including each employee on leave of absence or layoff status: employer;
name; job title; current compensation paid or payable and any change in
compensation since December 31, 1995; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under any
pension, retirement, profit-sharing, thrift-savings, deferred compensation,
stock bonus, stock option, cash bonus, employee stock ownership (including
investment credit or payroll stock ownership), severance pay, insurance,
medical, welfare, or vacation plan, other employee pension benefit plan or
employee welfare benefit plan, or any other employee benefit plan or any
director plan.
6.21.1. No employee, consultant, representative or director
of Celtic is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, non-competition, or proprietary
rights agreement, between such employee, consultant, representative or
director and any other Person ("Proprietary Rights Agreement") that in any
way materially adversely affects or could reasonably be expected to materially
adversely affect (i) the performance of his duties as an employee or director
of Celtic, or (ii) the ability of Celtic to conduct its business. To the
Knowledge of Celtic, no director, officer, or other key employee of Celtic
intends to terminate his employment with Celtic; provided, however, that for
purposes of this Section 6.21.1, Celtic shall not be deemed to be obligated to
make any inquiry of any director, officer or key employee concerning their
intention to terminate their employment with Celtic.
6.22. Relationships with Affiliates or Associates . Except as set
forth in the Celtic SEC Reports or in Schedule 6.22, no Affiliate or Associate
of Celtic has, or since January 1, 1994 has had, any interest in any property
(whether real, personal, or mixed and whether tangible or intangible), used in
or pertaining to Celtic. No Affiliate or Associate of Celtic is, or since
January 1, 1994 has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction with
Celtic, other than business dealings or transactions conducted in the Ordinary
Course of Business at substantially prevailing market prices and on
substantially prevailing market terms, or (ii) engaged in competition with
Celtic with respect to any line of the products or services of Celtic
(a "Competing Business") in any market presently served by Celtic. Except as set
forth in Schedule 6.22, no Affiliate or Associate of Celtic is a party to any
Contract with, or has any claim or right against, Celtic.
6.23. Brokers. Celtic has not incurred nor will it incur any
brokerage, finder's, or similar fee in connection with the Transaction.
6.24. Celtic Schedules. Within seven (7) days from the date hereof,
Celtic shall deliver to the Shareholders the following schedules (collectively
"Celtic Schedules") which consist of separate schedules dated as of the date
of execution of this Agreement and instruments and data as of such date, all
certified by the chief executive officer of Celtic as complete, true, and
correct in all material respects:
(a) A Schedule describing any and all options, warrants
or other rights to purchase the securities of Celtic, together with
copies of any documents relating thereto; and all registration rights
and preemptive rights relating to any security of Celtic (Schedule
6.2);
(b) A Schedule containing complete and correct copies of
the Articles of Incorporation and Bylaws, as amended, of Celtic and
each Celtic Subsidiary in effect as of the date of this Agreement and
all Board of Director and shareholder minutes and resolutions
adopted since their respective incorporations. (Schedule 6.6);
(c) A Schedule including Celtic Financial Statements
(Schedule 6.7);
(d) A Schedule of all liabilities (exceeding $50,000)
included on the Celtic Financial Statements or arising thereafter.
This Schedule shall be updated as of Effective Date and such updated
Schedule shall be delivered to Shareholders immediately prior to the
Effective Time (Schedule 6.8);
(e) A Schedule setting forth a description of any material
adverse change in the business, operations, property, inventory,
assets, or condition of Celtic since the date of Celtic Financial
Statements (Schedule 6.9);
(f) A Schedule containing a description of any
litigation pending or Threatened (Schedule 6.10);
(g) A Schedule containing a description of all leases
and Material Contracts of Celtic (Schedule 6.12);
(h) A Schedule containing copies of all Tax Returns of
Celtic (Schedule 6.14);
(i) A Schedule listing all Celtic Subsidiaries and a
description of the capitalization of each Celtic Subsidiary (Schedule
6.15);
(j) A Schedule of all intellectual property owned by
Celtic (Schedule 6.17);
(k) A Schedule describing all employee advances
(Schedule 6.18);
(l) A Schedule of all insurance maintained by Celtic
(Schedule 6.19);
(m) A Schedule containing copies of all contracts for
employment of any officer or employee that is not terminable on 30
days (or less) notice (Schedule 6.21);
(n) A Schedule describing transactions with
Shareholders, Associates or Affiliates (Schedule 6.22);
(o) A Schedule of all other documents, disclosures, or
representations required to be disclosed by this Agreement or
required to be disclosed in order to set forth all material facts
regarding Celtic.
6.24.1. The Celtic Schedules delivered pursuant this
Agreement are qualified in their entirety by reference to specific provisions of
this Agreement, and are not intended to constitute, and shall not be construed
as constituting, independent representations and warranties of Celtic to any
extent. The Celtic Schedules may include items or information which Celtic
is not required to disclose under this Agreement; disclosure of such items or
information shall not affect (directly or indirectly) the interpretation of the
Agreement or the scope of the disclosure obligation under this Agreement,
including, without limitation, any assessment of whether any matter arose or
any agreement was entered into in the Ordinary Course of Business.
Inclusion of information herein shall not be construed to establish a specific
definition or level of what is material to the business, assets, financial
position, operations or results of operations of Celtic other than what is
provided in the representations or warranties themselves.
6.24.2. Celtic may provide additional schedules to qualify
one or more of the representations and warranties of Celtic in whole or in part
and any such Schedule so delivered in accordance with Section 6.24 shall
constitute a Celtic Schedule and qualify and limit the representations and
warranties of Celtic for all purposes of this Agreement to the same extent as
if such Schedule were referred to in this Agreement. The descriptions of the
Celtic Schedules set out in this Section 6.24 are for convenience of reference
only and not intended to modify, or to constitute additional, representations
or warranties to any extent or for any purpose. In the event of any
discrepancy or conflict between the description of a Celtic Schedule as set
out in this Section 6.24 and the actual language of the representation or
warranty, the actual language of the representation or warranty shall control
for all purposes and this Section 6.24 shall not be used to interpret their
meaning to any extent or for any purpose.
6.25. Information. Celtic represents that it has not failed to
disclose any information known to it relating to it that is material to a
decision to purchase the Celtic Shares. To the Knowledge of Celtic, none of the
representations or warranties contained in Article VI of this Agreement contain
any untrue statement of material fact or omits to state a material fact required
to make the statements contained therein not misleading in light of the
circumstances under which they were made.
6.26. Additional Information Available. Celtic will make available
to each Shareholder the opportunity to ask questions and receive answers
concerning the acquisition of Celtic Common Stock in the Transaction, and
to obtain any additional information which Celtic possesses or can acquire
without unreasonable effort or expense.
6.27. Limitation on Liability. Notwithstanding anything to the
contrary contained in this Agreement, Celtic shall have any liability for any
misrepresentation or breach of any representation or warranty contained in
this Article VI if SLM or either of the Shareholders has actual knowledge
(rather than Knowledge) of such misrepresentation or breach.
Article VII
Conduct Prior to Closing
7.1. Conduct of Business. Prior to the Effective Time, SLM and
Celtic shall conduct their business only in the Ordinary Course of Business.
7.2. Additional Covenants by SLM and SLM Shareholders and Celtic.
Between the date hereof and the Effective Time, except as contemplated by
this Agreement or with the prior written consent of the other parties, which
consent shall not unreasonably be withheld, neither Celtic nor SLM shall:
(a) make any change in its Articles of Incorporation or
Bylaws;
(b) make any change in the authorized or issued shares
except as contemplated by this Agreement;
(c) make any payment or distribution to shareholders (with
respect to their stock) or purchase or redeem any shares of capital
stock;
(d) except in the Ordinary Course of Business, mortgage,
pledge, or subject to lien or encumbrance any of assets, tangible or
intangible;
(e) except in the Ordinary Course of Business, cancel any
debts or claims or waive any rights of value;
(f) except in the Ordinary Course of Business, incur any
indebtedness or guarantees or enter into any commitment or make
any material capital expenditures or investments;
(g) make any loan, accrual or arrangement for or payment
of bonuses or special compensation of any kind or any severance or
termination pay to, any of its present or former officers or
employees;
(h) make any material change in its method of
management, operation, or accounting;
(i) enter into any other material transactions;
(j) except in the Ordinary Course of Business, hire any
Person as an employee;
(k) adopt any profit sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan,
payment, or arrangement made to, for, or with its officers, directors,
or employees;
(l) grant or agree to grant any options, warrants, or other
rights for its stocks, bonds, or other corporate securities calling
for the issuance thereof;
(m) except in the Ordinary Course of Business, sell or
transfer, or agree to sell or transfer, any of its assets, property,
or rights or cancel or agree to cancel, any debts or claims;
(n) make or permit any amendment or termination (other
than in accordance with its terms) of any material Contract,
agreement, or license to which it is a party; or
(o) agree to do any of the foregoing.
7.3. Access. SLM shall give access to Celtic (and its auditors,
counsel and other authorized representatives), and Celtic shall give access to
the Shareholders (and their accountants, counsel and other authorized
representatives) to (i) their respective premises, books and records, including
minute books and stock transfer records, and (ii) all contracts, agreements
and documents whether or not listed in the Schedules hereto; provided,
however, that any such investigation shall not affect any of the
representations and warranties hereunder or the right of any party hereto to
rely thereon; and provided further, that any such investigation shall be
conducted in such a manner as not to interfere unreasonably with the
operation of the business of SLM and Celtic. In the event of termination of
this Agreement for any reason Celtic, on the one hand, and SLM and the
Shareholders, on the other hand, will promptly return, or cause to be returned,
to the other, all non-public documents obtained from the other party, and any
copies of such documents.
7.3.1. Celtic, SLM and Shareholders agree to keep
confidential any information obtained pursuant to their respective inspections
under this Agreement unless (i) such information is ascertainable from public
sources or is or becomes public other than through the inspecting party or
its representatives, or (ii) disclosure of such information is required by
applicable securities or other laws. In the event of the termination of this
Agreement, each of Celtic, SLM, and the Shareholders agree that they will not
disclose, utlize or exploit to their advantage any information obtained from the
other pursuant to its examinations under this Agreement, unless necessary to
comply with applicable law (with prior notice to the other) or to enforce its
rights hereunder.
The parties agree that a breach of the provisions of Section 7.3.1 of
this Agreement could cause irreparable damage to the other parties.
Consequently, each agrees that in the event of any breach of any provision
of this Section 7.3.1 of this Agreement, a nonbreaching party, at its option,
in addition to any other remedies provided by law or otherwise, may apply to
any court of competent jurisdiction for the entry of an immediate Order to
restrain or enjoin the breach of these provisions and to otherwise specifically
enforce the provisions of Section 7.3.1 of this Agreement. Each party hereby
expressly waives the claim or defense in any such action that the aggrieved
party has an adequate remedy at law or in damages.
7.4. Compliance with Blue Sky Law. The parties shall jointly take
such action, make such filings and pay such filing fees as may be reasonably
necessary to comply with all applicable state blue sky laws, rules and
regulations relating to the issuance of securities in the Transaction.
7.5. Disclosure Supplements, Etc.. Celtic will promptly notify
SLM of any material event or change in the business or operation of Celtic
or any Celtic Subsidiary. From time to time prior to the Effective Time, Celtic
will supplement or amend the Celtic Schedules with respect to any matter
hereafter arising which, if existing or occurring at or prior to the date of
this Agreement would have been required to be set forth or described in a Celtic
Schedule or which is necessary to complete or correct any information in the
Celtic Schedules or in any representation or warranty of Celtic which has been
rendered inaccurate thereby. For purposes of Articles VIII and IX hereof no
such supplement or amendment to the Celtic Schedules or additional
schedules shall be given effect but such supplement, amendment or additional
schedule shall be given effect for purposes of claims with respect to breaches
of representations and warranties pursuant to Article X of this Agreement.
SLM and the Shareholders will promptly notify Celtic of any
material event or change in the business or operation of SLM or any SLM
Subsidiary. From time to time prior to the Effective Time, SLM and the
Shareholders will supplement or amend the SLM Schedules with respect to
any matter hereafter arising which, if existing or occurring at or prior to the
date of this Agreement would have been required to be set forth or described
in an SLM Schedule or which is necessary to complete or correct any
information in the SLM Schedules or in any representation or warranty of SLM
which has been rendered inaccurate thereby. For purposes of Articles VIII
and IX hereof no such supplement or amendment to the SLM Schedules or
additional schedules shall be given effect but such supplement, amendment
or additional schedule shall be given effect for purposes of claims with
respect to breaches of representations and warranties pursuant to Article X
of this Agreement.
7.6. Reasonable Efforts. Subject to the provisions hereof, the
parties hereto shall use their reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper or
advisable under the provisions of this Agreement and under applicable laws
and regulations to consummate and make effective the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing sentence, Celtic shall use its reasonable efforts to insure that the
conditions set forth in Article VIII hereof are satisfied insofar as such
matters are within the control of Celtic and SLM and the Shareholders will use
their reasonable efforts to insure that the conditions set forth in Article IX
hereof are satisfied, insofar as such matters are within their control.
7.7. Public Announcements. Prior to the Effective Time, no
announcement or disclosure of the Transaction will be made by any party
without the consent of all other parties, which shall not be unreasonably
withheld; provided that Celtic may make an announcement if, on the advice
of counsel and after reasonable notice to SLM and to the Shareholders it is
required to do so under relevant securities laws or NASDAQ rules.
Article VIII
Conditions of Shareholders
The obligation of SLM and the Shareholders to consummate the
Transaction is subject to the fulfillment by Celtic prior to or as of the
Effective Time, of each of the following conditions, any of which may, at the
sole option of SLM and the Shareholders, be waived:
8.1. Representations. The representations and warranties by or on
behalf of Celtic contained in this Agreement or in any certificate or documents
delivered to the Shareholders or to SLM pursuant to the provisions hereof,
shall be true in all material respects when made and at the Effective Time as
though such representations and warranties were made at and as of such
time.
8.2. Compliance. Celtic and Celtic Merger Sub shall have performed
and complied in all material respects with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by
it prior to or at the Effective Time.
8.3. No Material Adverse Change. There shall not have occurred (i)
any material adverse change since November 30, 1996 in the business,
Prospects, properties, results of operations or financial condition of Celtic
and the Celtic Subsidiaries taken as a whole; or (ii) any loss or damage to any
of the Prospects, properties of or assets of Celtic and the Celtic Subsidiaries
taken as a whole which could reasonably be expected to materially adversely
affect or impair their ability to conduct after the Transaction the business now
being conducted by them.
8.4. Certificate of Celtic. Celtic shall have delivered to
Shareholders, a certificate of Celtic, dated the Effective Time, and signed by
its President to the effect that (i) each of the representations and warranties
of Celtic contained herein is true in all material respects as of the Effective
Time; and (ii) Celtic and Celtic Merger Sub have performed, in all material
respects, all obligations and complied with all covenants required by this
Agreement to be performed and complied with by them prior to the Effective Date.
8.5. Absence of Litigation. There shall not be any material
litigation, proceeding or governmental investigation pending, Threatened or
reasonably believed by Shareholders to be in prospect pertaining to Celtic any
Celtic Subsidiary or the Transaction.
8.6. Good Standing. Each of Celtic and Celtic Merger Sub will be
in good standing in their states of organization at the Effective Time and each
shall deliver a Certificate of Good Standing to the Shareholders at the
Effective Time.
8.7. Employment Agreements. SLM and Celtic shall have executed
and delivered to ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇ ▇▇▇▇▇ employment agreements
in the form of Exhibits E-1 and E-2 hereto, respectively and Celtic shall have
executed and delivered to ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇ ▇▇▇▇▇ option
agreements in the form of Exhibits F-1 and F-2 respectively.
8.8. Consents. Any notices, filings, consents or approvals
identified on the Celtic Schedules or on the SLM Schedules shall have been
filed, made or obtained and any waiting periods thereunder shall have lapsed.
The Shareholders shall have approved the Merger pursuant to the Utah Revised
Business Corporations Act.
8.9. Advantage. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. shall have transferred to SLM
all of the outstanding capital stock of SLM Holdings, Inc. as a capital
contribution, and SLM shall have acquired all of the outstanding capital stock
of Advantage Realty, Inc. for consideration consisting solely of shares of SLM
Common Stock.
8.10. Escrow Agreement. Celtic shall have executed and delivered
to the Shareholders an Escrow Agreement in the form of Exhibit C hereto.
8.11. Certificate. All of the certificates and documents referred
to in Article IV shall have been delivered to the Shareholders by Celtic.
Article IX
Conditions of Celtic
The obligation of Celtic to consummate the Transaction is subject
to the fulfillment, by Shareholders and SLM, prior to or as of the Effective
Time, of each of the following conditions, any of which may, at the sole
option of Celtic, be waived:
9.1. Representations. The representations and warranties by or on
behalf of SLM and Shareholders contained in this Agreement or in any
certificate or documents delivered pursuant to the provisions hereof shall be
true in all material respects when made and at the Effective Time as though
such representations and warranties were made at and as of such time.
9.2. Compliance. Shareholders and SLM shall have performed and
complied in all material respects with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by
it prior to or at the Closing at the Effective Time.
9.3. No Material Adverse Change. There shall not have occurred (i)
any material adverse change since August 31, 1996 in the business,
Prospects, properties, results of operations or financial condition of SLM and
the SLM Subsidiaries taken as a whole; or (ii) any loss or damage to any of
the properties of or assets of SLM and the SLM Subsidiaries taken as a
whole which could reasonably be expected to materially adversely affect or
impair their ability to conduct after the Transaction the business now being
conducted by them.
9.4 Certificates of Shareholders and SLM. SLM and each
Shareholder shall have delivered to Celtic a certificate of each of them dated
the Effective Time, signed by the President of SLM and by each of the
shareholders to the effect that (i) each of the representations and warranties
of shareholders and SLM contained herein is true in all material respects as
of the Effective Time; and (ii) SLM has in all material respects performed all
obligations and complied with all covenants required by this Agreement to be
performed and complied with by it prior to the Effective Date.
9.5. Absence of Litigation. There shall not be any material
litigation, proceeding or governmental investigation pending, Threatened or
reasonably believed by Celtic to be in prospect pertaining to the Shareholders,
SLM, any SLM Subsidiary or the Transaction except as disclosed in the SLM
Schedules.
9.6 Good Standing. SLM will be in good standing in the State of
Utah at the Effective Time and shall deliver a Certificate of Good Standing to
Celtic at the Effective Time.
9.7. Investment Letters. The Shareholders shall deliver to Celtic an
Investment Letter in the Form of Exhibit AD@.
9.8. Form 8-K Financial Statements. SLM shall deliver to Celtic its
financial statements which meet the requirements of Form 8-K as
promulgated under the Securities Exchange Act.
9.9. Employment Agreements. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇ ▇▇▇▇▇
shall have executed and delivered to Celtic employment agreements in the
form of Exhibits E-1 and E-2 hereto, respectively.
9.10. Consents. Any notices, filings, consents or approvals
identified on the Celtic Schedules or on the SLM Schedules shall have been
filed, made or obtained and any waiting periods thereunder shall have lapsed.
9.11. Advantage. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. shall have transferred to SLM
all of the outstanding capital stock of SLM Holdings, Inc. as a capital
contribution, and SLM shall have acquired all of the outstanding capital stock
of Advantage Realty, Inc. for consideration consisting solely of shares of SLM
Common Stock.
9.12. Escrow Agreement. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇ ▇▇▇▇▇ shall
have executed and delivered to the Celtic an Escrow Agreement in the form
of Exhibit C hereto.
9.13. Certificate. All of the certificates and documents referred
to in Article IV shall have been delivered to the Celtic by SLM and the
Shareholders.
Article X
Indemnification, Survival, Termination And Expenses
10.1. Nature and Survival of Representations. All representations
and warranties made by any party to this Agreement shall survive the
Effective Time for three (3) years and the covenants and agreements herein
shall survive the closing. All of the parties hereto are executing and carrying
out the provisions of this Agreement in reliance solely on the representations,
warranties, and covenants and agreements contained in this Agreement and
on the information contained in the Schedules and Exhibits attached hereto
and not upon any investigation which it or he might have made or any
representations, warrants, agreement, promise, or information, written or oral,
made by another party or another Person other than as specifically set forth
herein.
10.2. Indemnification and Payment of Damages by Shareholders.
Each Shareholder, individually and not jointly and severally, will indemnify and
hold harmless Celtic and its officers and directors (collectively, the
"Indemnified Persons"), and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including costs of investigation and defense and
reasonable attorneys' fees) or diminution of value, whether or not involving
a third-party claim (collectively, "Damages"), arising, directly or indirectly,
from or in connection with (a) any breach of any representation or
warranty made by such Shareholder in this Agreement or in any certificate
delivered by such Shareholder pursuant to this Agreement; or (b) any breach
by such Shareholder of any covenant or obligation of such Shareholder in this
Agreement; provided, however, that if any Shareholder has "Knowledge" of a
matter giving rise to a breach of a representation or warranty and the other
Shareholder does not have Knowledge of such matter, then the Shareholder
without such Knowledge shall not be liable to any extent to any party on
account of such breach of representation or warranty.
10.3. Indemnification and Payment of Damages by Celtic. Celtic
will indemnify and hold harmless Shareholders (collectively the "Indemnified
Persons"), and will pay to the Indemnified Persons the amount of any
Damages arising, directly or indirectly, from or in connection with (a) any
breach of any representation or warranty made by Celtic in this Agreement or
in any certificate delivered by Celtic pursuant to this Agreement or (b) any
breach by Celtic of any covenant or obligation of Celtic in this Agreement.
10.4. Limitations on Amount--Shareholder. The Shareholders are
individually, and not jointly or severally, liable for damages with respect to
breaches of representations, warranties or covenants. The breach of a
particular representation, warranty or covenant by one of the Shareholders will
not necessarily be a breach by the other unless the other Shareholder has
independently breached such representation, warranty or covenant. A
Shareholder will not have liability (for indemnification or otherwise) with
respect to the matters described in Section 10.2 until the total of all Damages
attributed to a such Shareholder=s breach with respect to such matters
exceeds $20,000, and then only for the amount by which such Damages
exceed $20,000; provided, however, subject to Section 10.4.1, the maximum
amount a Shareholder shall be required to pay hereunder for any and all
breaches of representations and warranties under this Agreement is One
Hundred Fifty Thousand Dollars ($150,000.00).
10.4.1. The liability limit of $150,000 agreed to in Section
10.4 shall be increased to $250,000 with respect to, and only to the extent
of, Damages resulting from breaches of representations and warranties of
which a Shareholder had actual knowledge at the time of Closing (rather than
"Knowledge"); provided, however that such limit of $250,000 shall not be
applicable to Damages resulting from breaches of representations and
warranties which constitute fraud as defined at common law (but with a
standard of actual knowledge at the time of Closing). Notwithstanding the
foregoing, in no event shall the aggregate liability of any Shareholder for all
breaches of representations, warranties and covenants and agreements
contained in this Agreement exceed the value of the Celtic Common Stock
received by such Shareholder in connection with the Merger. In the event of
any assessment of Damages against any Shareholder, such Shareholder may
deliver to Celtic shares of Celtic Common Stock owned by such Shareholder
in the amount of such Damages and thereafter shall be released from any and
all further liability in connection with such Damages. For purposes of this
Section 10.4.1, shares of Celtic common stock delivered to Celtic by a
Shareholder under this Section 10.4.1. shall be valued at a price which is
seventy five percent (75%) of the average closing price of Celtic common
stock, as reported by NASDAQ (or the American Stock Exchange or the New
York Stock Exchange if the Celtic common stock is trade on either such
Exchanges) for the seven business days immediately prior to the date such
additional Celtic shares are delivered to Shareholders. In the event of an
assessment of Damages against a Shareholder exceeds the value of the Celtic
Common Stock which such Shareholder was issued in the Merger, such
Shareholder may deliver to Celtic all of the Celtic Common Stock acquired by
him pursuant to the Merger and thereafter shall be released from any all
further liability under this Agreement and the Transaction, including to any
other Shareholder for contribution and indemnify.
10.5. Limitations on Amount--Celtic. Celtic will have no liability
(for indemnification or otherwise) with respect to the matters described in
clause (a) or (b) of Section 10.3 until the total of all Damages with respect to
such matters exceeds $20,000, and then only for the amount by which such
Damages exceed $20,000; provided, however, that subject to Section 10.5.1,
the maximum amount Celtic shall be required to pay hereunder is One
Hundred Fifty Thousand Dollars ($150,000.00).
10.5.1. The liability limit of $150,000 agreed to in Section
10.5 shall be increased to $250,000 with respect to, and only to the extent
of, Damages resulting from breaches of representations and warranties of
which Celtic had actual knowledge at the time of Closing (rather than
"Knowledge"); provided, however, that such limit of $250,000 shall not be
applicable to Damages resulting from breaches of representations and
warranties which constitute fraud as defined at common law (but with a
standard of actual knowledge at the time of Closing). Notwithstanding the
foregoing, in no event shall the aggregate liability of Celtic for all breaches
of representations, warranties and covenants and agreements contained in this
Agreement exceed the value of the SLM Common Stock received by Celtic in
connection with the Merger (which shall be deemed to be the value of the
Celtic Common Stock issued to the Shareholders in the Merger). In the event
of any assessment of Damages against Celtic, Celtic may deliver to each of
the Shareholders additional shares of Celtic Common Stock in the amount of
such Damages and thereafter shall be released from any and all further
liability under this Agreement and the Transaction. For purposes of this
Section 10.5.1, additional shares of Celtic common stock issued to the
Shareholders hereunder, shall be valued at a price which is seventy five
percent (75%) of the average closing price of Celtic common stock, as
reported by NASDAQ (or the American Stock Exchange or the New York Stock
Exchange if the Celtic common stock is trade on either such Exchanges) for
the seven business days immediately prior to the date such additional Celtic
shares are delivered to Shareholders.
10.6. Procedure for Indemnification--Third Party Claims.
10.6.1. Promptly after receipt by an Indemnified Person
under Sections 10.2 or 10.3, of notice of the commencement of any
Proceeding against it, such Indemnified Person will, if a claim is to be made
by it against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such claim, and with such notice
provide a copy of any demand letter, summons or applicable correspondence,
and any information with respect to insurance which may cover such claim
and information with respect to any third party who may be liable to in
connection therewith. The failure to notify the indemnifying party will not
relieve the indemnifying party of any liability that it may have to any
Indemnified Person, except to the extent that the indemnifying party
demonstrates that it is prejudiced by the indemnifying party's failure to give
such notice.
10.6.2. If any Proceeding referred to in Section 10.6.1 is
brought against an Indemnified Person and it or he gives notice to the
indemnifying party of the commencement of such Proceeding, the
indemnifying party will, unless the claim involves taxes, be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the Indemnified
Person determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the Indemnified Person of its financial capacity to defend such
Proceeding and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel reasonably satisfactory
to the Indemnified Person and, after notice from the indemnifying party to the
Indemnified Person of its election to assume the defense of such Proceeding,
the indemnifying party will not, as long as it diligently conducts such defense,
be liable to the Indemnified Person under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the Indemnified Person in
connection with the defense of such Proceeding, other than reasonable out
of pocket costs of investigation. If the indemnifying party assumes the
defense of a Proceeding, (i) it will be conclusively established for purposes
of this Agreement that the claims made in that Proceeding are within the
scope of and subject to indemnification; (ii) no compromise or settlement of
such claims may be effected by the indemnifying party without the
Indemnified Person's consent unless (A) there is no finding or admission of
any violation of Legal Requirements or any violation of the rights of any
Person and no effect on any other claims that may be made against the
Indemnified Person, and (B) the sole relief provided is monetary damages that
are paid in full by the indemnifying party; and (iii) the Indemnified Person
will have no liability with respect to any compromise or settlement of such
claims effected without its consent. If notice is given to an indemnifying party
of the commencement of any Proceeding and the indemnifying party does not,
within ten days after the Indemnified Person's notice is given, give notice to
the Indemnified Person of its election to assume the defense of such
Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the
Indemnified Person except that the Indemnified Person shall give the
indemnifying party seven days prior notice of the terms of any proposed
settlement and the Indemnified Person shall not be liable to the extent that any
Proceeding is conducted in, or the compromise or settlement is entered into
in bad faith.
10.6.3. Notwithstanding the foregoing, if an Indemnified
Person determines in good faith that there is a reasonable probability that a
Proceeding is reasonably likely to materially adversely affect it or its
Affiliates other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the Indemnified Person may, by
notice to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party will not be
bound by any determination of a Proceeding so defended or any compromise or
settlement effected without its consent (which may not be unreasonably
withheld). The Indemnified Person shall give the indemnifying party seven
days prior notice of the terms of any proposed settlement and the Indemnified
Person shall not be liable to the extent that any Proceeding is conducted in,
or the compromise or settlement is entered into in bad faith.
10.6.4. Shareholders hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may
have under this Agreement with respect to such Proceeding or the matters
alleged therein, and agree that process may be served on Shareholders with
respect to such a claim anywhere in the world.
10.7. Procedure for Indemnification--Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be
asserted by notice and with such notice provide a copy of any demand letter,
summons or applicable correspondence, and any information with respect to
insurance which may cover such claim and information with respect to any
third party who may be liable to an Indemnified Person in connection
therewith. to the party from whom indemnification is sought.
10.8. Arbitration.
10.8.1. All disputes arising out of this and any other
controversy, claim or dispute arising out of or relating to this Agreement or
the breach, termination, enforceability or validity hereof, including the
determination of the scope or applicability of the Agreement to arbitrate set
forth in this Agreement) shall be submitted to binding arbitration under Section
10.8.2) upon the written demand of Celtic or either Shareholder.
10.8.2. The Shareholder or Shareholders involved in the
arbitration and Celtic (the "Arbitrating Parties") shall each select one
qualified arbitrator within 10 days of the date of the demand for arbitration.
The arbitration shall be governed by the American Arbitration Association (the
AAAA@) under its commercial Arbitration Rules and its Supplementary
Procedures for Large, Complex Disputes, provided that persons eligible to be
selected as arbitrators shall be limited to attorneys-at-law who (a) are on the
AAA=s Large, Complex Case Panel or a Center for Public Resources ("CPR")
Panel of Distinguished Neutrals, or who have professional credentials similar
to the attorneys listed on such AAA and CPR Panels, and (b) who have
practiced law for at least 10 years as an attorney specializing in either
general commercial litigation or general corporate and commercial matters. The
two arbitrators so chosen shall select a neutral arbitrator who shall reside in
(or be employed within) the State of Utah. If the named arbitrators cannot
agree on a neutral arbitrator, the arbitrators shall make application to the AAA
Office in the State of Utah with a copy to the Arbitrating Parties, requesting
that the AAA select and appoint the third arbitrator, who shall not reside or
work in the State of Utah. This selection shall be final and binding.
Immediately upon appointment of the third arbitrator, the arbitrating parties
shall present in writing to the panel of three arbitrators (with a copy to the
other) their statement of the issues in dispute. Any questions of whether a
dispute should be arbitrated under this Section shall be decided by the
arbitrators.
In the event of conflict between the provisions of this Agreement and the
provisions of the commercial arbitration rules of the AAA, the provisions of
this Agreement shall prevail.
The arbitrators, as soon as possible, shall meet in Salt Lake
City, at a time and place reasonably convenient for the participants, after
giving each of the Arbitrating Parties at least 10 days' notice. The failure of
an Arbitrating Party to appear at a hearing shall not operate as a default, and
the attendance of all arbitrators shall not be required at all hearings.
Actions of the arbitrators shall be by majority vote. After the hearing, the
Arbitrating Parties in regard to the matter in dispute, taking such evidence and
making such other investigation as justice requires and as the arbitrators deem
necessary, they shall decide the issues submitted to them as promptly as
possible and serve a written and signed copy of the award upon each of the
Arbitrating Parties. To assure the Arbitrating Parties that disputes and
controversies will be resolved expeditiously, the final arbitration hearing will
occur within 60 days after the arbitration is initiated and there will be
limited discovery (including no more than two depositions per party) prior to
the arbitration hearing. If the participants in the arbitration settle the
dispute in the course of the arbitration, such settlement shall be approved by
the arbitrators on request any of the Arbitrating Parties and become the award.
10.8.3. No provision of, nor the exercise of any rights
under, this Section 10.8, shall limit the right of any party to request and
obtain from a court of competent jurisdiction in the State of Utah (which shall
have exclusive jurisdiction for purposes of this Agreement before, during or
after the pendency of any arbitration) provisional or ancillary remedies and
relief including, but not limited to, injunctive or mandatory relief or the
appointment of a receiver. The institution and maintenance of an action or
judicial proceeding for, or pursuit of, provisional or ancillary remedies shall
not constitute a waiver of the right of any party, even if it is the plaintiff,
to submit the dispute to arbitration if such party would otherwise have such
right. Each of the parties hereby submits unconditionally to the exclusive
jurisdiction of the state and federal courts located in the State of Utah for
purposes of this provision, waives objection to the venue of any proceeding
in any such court or that any such court provides an inconvenient forum and
consents to the service of process upon it in connection with any proceeding
instituted under this Section 10.8 in the same manner as provided for the
giving of notice hereunder.
10.8.4. Judgment upon the award rendered may be entered
in any court having jurisdiction. The Arbitrating Parties hereby expressly
consent to the nonexclusive jurisdiction of the state and federal courts
situated in the State of Utah for this purpose and waive objection to the venue
of any proceeding in such court or that such court provides an inconvenient
forum.
10.8.5. Each of the parties shall, subject to the award of
the arbitrators, pay an equal share of the arbitrators= fees except the
arbitrators shall have the power to award recovery of all costs (including
attorneys' fees, administrative fees, arbitrators' fees and court costs) to the
prevailing party, as determined by the arbitrators.
10.9. Exclusive Remedies. The indemnification provisions set forth
in this Article 10 are the sole and exclusive remedies that any party may have
for breach of any representation, warranty or covenant.
10.10. Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by the mutual consent of the Shareholders and Celtic;
(b) by either the Shareholders or Celtic if the Effective
Time has not occurred by January 31, 1997, or such other date, if any,
as the parties may agree to in writing;
(c) by the Shareholders or Celtic if any other party refuses
or fails to perform any covenant or agreement required to be
performed by it under this Agreement or if any representation or
warranty of any other party proves to have been inaccurate or
misleading in any material respect at the time it was made or at the
Effective Time and the other party refuses or fails after notice to
correct or make not misleading any such misrepresentation or
warranty;
(d) by Celtic for any reason within ten (10) days after it
has received all of the SLM Schedules; and
(e) by Shareholders for any reason within ten (10) days
after they has received all of the Celtic Schedules.
10.11. Effect of Termination. If this Agreement is terminated as
permitted by Section 10.10 of this Agreement, such termination will be
without liability of any party (or any shareholder, director, officer, employee,
agent, consultant, or representative of such party) to the other parties to this
Agreement; provided, that if such termination results from the failure of a
party to use its or his best efforts to fulfill a condition to the performance
of the obligations of the other parties or to perform a covenant of this
Agreement or from a breach by any party to this Agreement, such party will be
fully liable up to a maximum of $20,000 for any and all damages, costs, and
expenses (including, but not limited to, reasonable counsel fees) sustained or
incurred by the other parties as a result of such failure or breach.
Article XI
Miscellaneous
11.1. Notices. Any notice provided for by this Agreement and any
other notice, demand, or communication that any party may wish to send
another will be in writing and either delivered in Person, transmitted by
telecopier with receipt appropriately confirmed, or sent by registered or
certified United States mail, first class postage prepaid, return receipt
requested, in a properly sealed envelope, and addressed as follows:
If to Celtic:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to: ▇. ▇. ▇▇▇▇▇▇▇, ▇▇.
Cohne, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
525 East 100 South, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
If to SLM or the Shareholders:
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ and SLM
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
The parties to this Agreement may change their addresses for notice
by notice given in the manner provided above. Any notice, demand, or other
communication will be deemed given and effective as of the date of delivery
in Person or upon receipt as set forth on the return receipt. The inability to
deliver because of changed address of which no notice was given or the
rejection or other refusal to accept any notice, demand, or other
communication, will be deemed to be the receipt of the notice, demand, or
other communication as of the date of such inability to deliver or the rejection
or refusal to accept.
11.2. Entire Agreement. This Agreement, together with all Schedules
and Exhibits attached to this Agreement or referenced herein, constitutes the
entire agreement between the parties pertaining to the subject matter of this
Agreement and supersedes all prior agreements, understandings, negotiations,
and discussions, whether oral or written, of the parties, including but not
limited to the Letter of Intent heretofore entered into by the parties and there
are no warranties, representations, or other agreements between the parties
in connection with the subject matter of this Agreement except as specifically
set forth in this Agreement.
11.3. Effect; Assignment. This Agreement and all of the provisions
of this Agreement will be binding and inure to the benefit of the parties to
this Agreement and their respective successors and permitted assigns, but,
except as expressly provided in this Agreement neither this Agreement nor any of
the rights, interests, or obligations under this Agreement will be assigned by
operation of law (excluding mergers, changes of domicile or other corporate
reorganizations) or otherwise, by any party to this Agreement without the prior
written consent of the other party. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than the parties to this
Agreement and their respective successors and permitted assigns, any rights,
remedies, or obligations under or by reason of this Agreement.
Notwithstanding anything else contained in this Agreement to the contrary,
this Agreement and the rights, interests or obligations of Celtic, Celtic Merger
Sub, SLM and of each Shareholder under this Agreement, shall survive any
merger, change of domicile or other corporate reorganization and this
Agreement shall continue in full force and effect as though such merger,
change of domicile or other corporate reorganization had not occurred, and
in such event, the rights, interests or obligations of Celtic, Celtic Merger
Sub, SLM and of each Shareholder under this Agreement shall be the rights,
interests or obligations of their respective successors.
11.4. Amendments; Waivers. No supplement, modification, or
amendment of this Agreement will be binding unless executed in writing by
all parties to this Agreement. No waiver of any of the provisions of this
Agreement will be deemed or will constitute a waiver of any other provision
of this Agreement (regardless of whether similar), nor will any such waiver
constitute a continuing waiver unless otherwise expressly provided.
11.5. Further Assurances. At any time and from time to time, after
the Effective Date, each party will execute such additional instruments and
take such action as may be reasonably requested by the other party to
confirm or perfect title to any property transferred hereunder or otherwise to
carry out the intent and purposes of this Agreement.
11.6. Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
11.7. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
11.8. Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
11.9. Governing Law. This Agreement shall be governed for all
purposes by the laws of the State of Utah applicable to agreements executed
and to be wholly-performed in the State of Utah.
11.10. Legal Fees and Expenses. The prevailing party in any
proceeding brought to enforce or interpret any provision of this Agreement
shall be entitled to recover its reasonable attorney's fees, costs and
disbursements incurred in connection with such proceeding, including, but not
limited to the costs of experts, accountants and consultants and all other
costs and services reasonably related to the proceeding, including those
incurred in any bankruptcy or appeal, from the non-prevailing party or parties.
11.11. Schedules, Exhibits and Amendments. Disclosure in any
Schedule of any allegations with respect to any alleged failure to perform, or
breach or default of a contractual or other duty or obligation shall not be
deemed an admission to any party other than a party hereto that such has in
fact occurred, but shall be effective for the purposes for which such Schedule
is intended as if such had in fact occurred.
11.11.1. Descriptions of agreements, instruments
and other matters herein not required by the Agreement to be included herein
are provided for reference only and are not intended to be complete and are
not represented as such and each party is hereby referred to the actual
agreement or instrument for a description thereof. References to the
agreements and instruments herein include the Schedules, Exhibits and
amendments thereto.
11.11.2. Headings have been inserted in the
Schedules for convenience of reference only and shall to no extent have the
effect of amending or changing the express description of the materials to be
disclosed thereon as set forth in the Agreements or other information
contained in such Schedules.
IN WITNESS WHEREOF, the parties have executed this Agreement the
day and year first above written.
CELTIC INVESTMENT, INC,
a Delaware corporation
Dated: January 15, 1997 By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
SALT LAKE MORTGAGE CORP.
a Utah corporation
Dated: January 15, 1997 By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇., President
SLM SHAREHOLDERS
Dated: January 15, 1997 By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
Dated: January 15, 1997 By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇